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By Dennis J. Ventry, Jr.
In 2003, President Bush kicked off "Marriage Protection Week" by
declaring that his 2001 and 2003 tax cuts had "eliminated the marriage
penalty."[1] He lied. Bush’s own Treasury Department reported that 18
million couples suffered marriage tax penalties in 2004 totaling $19.1
billion.[2]
In fairness, the President’s tax cuts reduced aggregate marriage
penalties by, among other things, doubling the standard deduction for
married taxpayers vis-à-vis single taxpayers and doing the same for the
10- and 15-percent rate brackets. But the President’s tax policies did
nothing to ameliorate marriage tax penalties associated with the other
four tax brackets (i.e., the 25-, 28-, 33-, and 35-percent brackets).
Moreover, increasing the standard deduction for married taxpayers
bestowed marriage tax bonuses on all single-earner families, and moved
two-earner husbands and wives approximating the traditional,
single-earner norm from the marriage-penalty column to the
marriage-bonus column. Similarly, broadening the parameters of the
bottom brackets extended marriage tax bonuses to traditional and
near-traditional families at the low end of the income spectrum. In the
end, the Bush policies reinforced traditional conceptions of the
family, and provided a net marriage tax bonus of $30 billion ($49
billion in bonuses less $19 billion in penalties).[3]
Candidates for the 2008 presidential election have already begun making
marriage penalty relief a campaign issue. Unfortunately, none of the
plans deviate from President Bush’s strategy of chipping away at
marriage penalties by extending marriage bonuses.
The top three Republican candidates, Rudy Giuliani, Mitt Romney, and
John McCain, all pledge to preserve the marriage penalty relief
provisions of 2001 and 2003. In addition, Giuliani would extend relief
to upper-income taxpayers by doubling the brackets for married persons,
thereby turning marriage penalties into marriage bonuses for couples
that say, "I do."[4]
The top three Democratic candidates have also made marriage penalty
relief a campaign issue. Senator Hillary Clinton supports "permanently
ending the marriage penalty," but as yet has not offered specific
strategies.[5] Senator Barack Obama[6] and John Edwards[7] would lessen
marriage penalties for low-income taxpayers by extending the qualifying
income range of the Earned Income Tax Credit (EITC); currently, the act
of marriage can result in huge tax penalties for two low-income
taxpayers, pushing their combined marital income—though still
modest—too far up the income scale to receive the credit. Both Obama
and Edwards would also extend EITC payments to low-income workers
without children (currently excluded from the program), thereby
lessening potential marriage penalties for this cohort. And Obama’s new
"Making Work Pay" tax credit ($500 for singles, $1,000 for married
couples) would further mitigate marriage penalties on the working poor
by exempting the first $8,100 of income from payroll taxes.
None of the current plans, Republican or Democrat, offers marriage
penalty relief reflective of the many faces of the modern American
family. The Giuliani proposal eliminates tax penalties by extending tax
bonuses (i.e., tax cuts) to upper-income married couples, a shrinking
minority of all taxpaying families. And while the Obama and Edwards
proposals address the tax concerns of non-traditional, two-earner
families, a growing majority of all taxpayers, their respective plans
to expand the EITC could have the perverse effect of endangering the
program by opening it to charges of "welfare for the middle class."
Marriage penalty relief in 2008 should embrace the spectrum of the
modern family. Married households represent less than half of all
households. Relieving them of tax liability relative to the majority of
taxpayers hardly seems fair. Given the many forms of modern families,
two policy alternatives are clearly preferable to the candidates’
plans.
First, policymakers should expand the definition of family for tax
purposes to include unmarried opposite- and same-sex couples, single
parents, cohabiting unmarried family members, and perhaps even platonic
roommates demonstrating economic interdependence. These families share
the same kind of expenses, responsibilities, and liabilities as married
families. There is no reason for the tax system to treat them
differently. Under an expanded definition of the family unit,
"marriage" penalties would become "family" penalties, and doubling tax
brackets for families would benefit all multi-person households.
Second, we could abandon the family as a unit of taxation altogether
and move to a system of individual filing. This approach would
effectively eliminate all marriage tax penalties. As importantly—and
unlike preserving the family as a unit of taxation—individual filing
would eliminate the secondary-earner bias in the tax system that
currently taxes the first dollar earned of the lesser-earning spouse
(disproportionately women) at the higher rates associated with the last
dollar earned of the primary-earning spouse.
Either approach—expanding our concept of "family" under the family tax
unit or adopting as the norm the individual unit—would more effectively
address the concerns of the modern American family in its various
forms.
Dennis J. Ventry, Jr. is an Assistant Professor of Law at American University Washington College of Law in Washington, DC.
[1] Marriage Protection Week, 2003, By the President of the United States of America: A Proclamation.
[2] Robert Gillette, Janet Holtzblatt, Emily Y. Lin, "Marriage
Penalties and Bonuses: A Longer-Term Perspective," Office of Tax
Analysis, Department of Treasury, December 2004, at 1.
[3] Id.
[4] See Gerald Prante, "Rudy Giuliani Unveils Tax Plan," Tax
Foundation Tax Policy Blog, August 27, 2007, available at
http://www.taxfoundation.org/blog/show/22572.html.
[5] "Strengthening the Middle Class," http://www.hillaryclinton.com/issues/middleclass/.
[6] See "Tax Fairness for the Middle Class," September 18, 2007,
available at
http://my.barackobama.com/page/-/HQpress/Fact%20Sheet%20Tax%20Fairness%20Speech%20091707%20FINAL%20IH.pdf.
[7] See "Building One Economy with Tax Reform To Reward Work,"
available at
http://johnedwards.com/issues/tax-reform/tax-policy-4pg.pdf.
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