Key Findings
A marriage penalty or bonus is the change in a couple’s total tax bill as a result of getting married and thus filing their taxes jointly.Marriage bonuses typically occur when two individuals with disparate incomes marry.Marriage penalties occur when two individuals with equal incomes marry; this is true for both high- và low-income couples.Marriage bonuses can be as high as đôi mươi percent of a couple’s income, & marriage penalties can be as high as 12 percent of a couple’s income.While retìm kiếm shows that marriage penalties & bonuses vị not have sầu much effect on whether a couple will marry, they do impact how much each spouse works.It is possible khổng lồ completely eliminate both marriage penalties và bonuses, but it would require a significant overhaul of the tax code that drastically changes the current distribution of income taxes paid.Bạn đang xem: Marriage là gì
Introduction<1>
One unintended feature of the United States’ income tax system is that the combined tax liability of a married couple may be higher or lower than their combined tax burden if they had remained single. This is called the marriage penalty or marriage bonus.
Marriage penalties and bonuses have a significant impact on the combined tax burden of couples. Marriage penalties affect taxpayers at very high and very low incomes, và marriage bonuses affect many middle-income couples with disparate incomes. Taxpayers with children also face large penalties và bonuses for marriage. While it is possible khổng lồ eliminate the marriage penalty and bonus, which would make the tax code more neutral with respect to lớn marriage, it would take a significant change lớn the United States’ income tax code. As a result, lawmakers may opt for smaller marriage penalty reliefs as they have sầu in the past.
What Are the Marriage Penalty và Marriage Bonus?
A marriage penalty or bonus is the change in a couple’s total tax bill as a result of getting married & thus filing their taxes jointly. The degree khổng lồ which the marriage penalty or bonus affects any given couple depends on the màn chơi of their combined income, the extent khổng lồ which their individual incomes are similar, & the number of children they have.
Marriage Bonus
The marriage bonus typically occurs when two individuals with disparate incomes marry. When an individual with a higher income marries and files jointly with an individual with a much smaller income, the additional income is usually not enough khổng lồ push the couple’s combined income into a higher tax bracket. However, due to lớn the much wider income tax brackets for married individuals, a lot of the couple’s income falls inkhổng lồ lower tax brackets. The result is a lower tax bill.
Suppose an unmarried couple earned a total of $75,000, but the distribution was unequal: $50,000 from the first partner and $25,000 from the second (Table 1). As an unmarried couple, their combined tax bill is $13,200. When the couple gets married và combines their incomes, their taxable income remains the same. However, the tax brackets for married couples widen. This means that less of the couple’s income is taxed at the 25 percent marginal tax rate than it was when they were not married. As a result, their combined tax bill would fall by $225 to $12,975.
| Income | $25,000.00 | $50,000.00 | $75,000.00 | $75,000.00 | Bonus |
| Taxable Income | $14,700.00 | $39,700.00 | $54,400.00 | $54,400.00 | Bonus |
| Income Tax | $1,743.75 | $5,718.75 | $7,462.50 | $7,237.50 | Bonus |
| Payroll Tax | $1,912.50 | $3,825.00 | $5,737.50 | $5,737.50 | Bonus |
| Total Tax | $3,656.25 | $9,543.75 | $13,200.00 | $12,975.00 | $225.00 |
Marriage Penalty
Marriage penalties typically occur when two individuals with equal incomes marry. There are marriage penalties for both high-income & low-income couples who fit this mô tả tìm kiếm. For high-income individuals, the marriage penalty exists because the income tax brackets for married couples at the top of the income tax schedule are not twice as wide as the equivalent brackets for single individuals. For example, the 33 percent tax bracket for singles starts at $189,300 of taxable income but starts at $230,450 of taxable income for married couples filing jointly. Adding two high, equal incomes together could easily push a married couple’s income inkhổng lồ a higher tax bracket, which results in a penalty.
An unmarried couple with equal incomes that earn a combined $300,000 would have a total tax bill of $83,232.50 ($64,374.50 from the individual income tax & an additional $18,858.00 from the payroll tax). If they were khổng lồ get married, they would be hit by a marriage penalty of $3,806.50 (Table 2). This penalty comes from two different taxes.
First, the narrower tax brackets for married individuals pushes more than $40,000 of their taxable income into the 33 percent marginal tax bracket. In addition, their combined income as a married couple would push their income high enough to be affected by the Medicare Surtax of 0.9 percent on income over $250,000. When unmarried, neither had khổng lồ pay because the surtax only applies to income over $200,000 for singles. Table 2 also includes the Alternative Minimum Tax, though the couple’s income tax burden is high enough in both cases that they vị not need khổng lồ pay the AMT.
| Income | $150,000.00 | $150,000.00 | $300,000.00 | $300,000.00 | Penalty |
| Taxable Income | $139,700.00 | $139,700.00 | $279,400.00 | $279,400.00 | Penalty |
| Income Tax | $32,187.25 | $32,187.25 | $64,374.50 | $67,731.00 | Penalty |
| Payroll Tax | $9,429.00 | $9,429.00 | $18,858.00 | $18,858.00 | Penalty |
| Medicare Surtax | $0.00 | $0.00 | $0.00 | $450.00 | Penalty |
| AMT | $27,066.00 | $27,066.00 | $54,132.00 | $66,817.00 | Penalty |
| Total Tax | $41,616.25 | $41,616.25 | $83,232.50 | $87,039.00 | $3,806.50 |
For low-income individuals, the Earned Income Tax Credit (EITC) has a significant impact on marriage penalties. Adding one partner’s income lớn the other partner’s income can easily push the combined income of the couple into lớn the phase-out range of the Earned Income Tax Credit, resulting in a reduction of the couple’s combined after-tax income.
Table 3 shows an example of a couple with equal incomes of $15,000 ($30,000 combined) with one child. Unmarried, their total tax bill would be -$1,594 due khổng lồ the refundability of the $1,000 Child Tax Credit (CTC) và the $3,359 Earned Income Tax Credit received by the individual who claimed the child. If they were khổng lồ marry, their combined tax bill would still be negative, but they would face a marriage penalty of $1,087.88.
| Income | $15,000.00 | $15,000.00 | $30,000.00 | $30,000.00 | Penalty |
| Taxable Income | $0.00 | $4,700.00 | $4,700.00 | $5,400.00 | Penalty |
| Income Tax | $0.00 | $470.00 | $470.00 | $540.00 | Penalty |
| EITC | $3,359.00 | $0.00 | $3,359.00 | $2,341.12 | Penalty |
| CTC | $1,000.00 | $0.00 | $1,000.00 | $1,000.00 | Penalty |
| Payroll Tax | $1,147.50 | $1,147.50 | $2,295.00 | $2,295.00 | Penalty |
| Total Tax | -$3,211.50 | $1,617.50 | -$1,594.00 | -$506.12 | $1,087.88 |
There are two reasons why this couple is hit with a penalty. First, when the couple is unmarried, one individual is able to clayên ổn head of household, which provides a larger standard deduction and wider tax brackets. When married, the couple loses the benefit of head of household status, which results in higher combined taxable income.
There Are Many Penalties & Bonuses in the Income Tax Code
Second, as an unmarried couple, one of the parents could clayên ổn their child for the EITC và receive the full amount of $3,359 with the income of $15,000 (Chart 1). However, when married, their total income of $30,000 pushes them into lớn the phase-out range of the Earned Income Tax Credit, reducing the credit amount by a little more than $1,000.
There are several areas in the tax code in which the marriage penalty & marriage bonus affect taxpayers. In the following charts, we modeled the effects of marriage on a couple’s tax bill given two factors: the level of income and the eunique of the couple’s income (from a couple with one earner to lớn a couple with equal incomes). This is done for a household with no children, one child, và two children.
Each chart’s X-axis is a measure of income from $10,000 lớn $1 million và Y-axis is the echất lượng of a couple’s income from a single earner khổng lồ 50-50 echất lượng, with the percent representing the mô tả of the couple’s income earned by the second earner.
Areas in the chart shaded xanh represent marriage bonuses và areas shaded red represent marriage penalties. The depth of the color represents the form size of the marriage penalty or bonus as a percent of a couple’s total income.
The first chart shows marriage penalties và bonuses for couples without children. It shows that marriage penalties exist for low- và high-income couples with more equal incomes. As discussed, low-income marriage penalties are due to the phase-out of the Earned Income Tax Credit. High-income penalties are due to narrower tax brackets for greater combined incomes. Marriage bonuses occur mainly for taxpayers with disparate incomes. The income tax is relatively neutral for couples with combined incomes between $40,000 and $150,000 that are relatively equally distributed.
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With no children, marriage bonuses can be up khổng lồ 7 percent of a couple’s total income, and penalties can be as large as 4 percent of a couple’s income.
The next chart shows that the individual income tax becomes much less neutral with respect khổng lồ marriage when a couple has a child. The Earned Income Tax Credit, which is a major driver of marriage penalties for low-income individuals, phases out much faster when the taxpayer has a child (15.98 percent instead of 7.65 percent).
Marriage bonuses also become more pronounced for low-income couples with one child. Both the Child Tax Credit và the Earned Income Tax Credit have sầu steep phase-in benefits with one child. This means a low-income, unmarried couple could decrease their total tax bill through marriage, which would add their incomes together & increase the kích thước of their EITC and Child Tax Credit.
With one child, marriage bonuses can be as large as 20 percent of a couple’s income, và penalties can be as large as 12 percent of a couple’s income.
The distribution of marriage penalties và bonuses for couples with two children looks similar to lớn the distribution for couples with one child, but the severity of penalties & bonuses is greater. With two children, the number of possible bonuses slightly increases for low-income couples but significantly declines for higher-income couples.
With two children, marriage bonuses can be as large as 10 percent of a couple’s income, & penalties can be as large as 12 percent of a couple’s income.
Marriage Penalties và Bonuses Matter
Marriage penalties và bonuses in the current income tax code violate neutrality. An unmarried couple và a married couple with identical combined incomes may be treated differently. In addition, the penalties và bonuses could impact people’s behaviors in two ways.
A change in a couple’s total tax bill through marriage could conceivably alter that couple’s decision lớn get married. For example, a couple that is facing a $5,000 tax increase for simply getting married may second guess their commitment. Conversely, a marriage bonus may induce a couple that is otherwise on the fence about marriage to tie the knot. However, most economic retìm kiếm has found that marriage penalties & bonuses have sầu little khổng lồ no effect on whether a couple will marry.<2>
Secondly, but more importantly, marriage penalties or bonuses may affect how much each spouse works. When couples get married & combine their incomes, one or both of the partners could face higher or lower marginal tax rates on their next dollar of income, which could affect their incentives khổng lồ work.
For example, if an unmarried couple with $50,000 of income earned by one partner gets married, the couple as a whole gets a marriage bonus of about $2,231. However, this bonus has different impacts on the marginal tax rates on each partner’s next dollar of income. The spouse that earns the $50,000 as a single used khổng lồ face a 32.6 percent marginal tax rate on income. Once married, the marginal rate drops 10 percentage points lớn 22.6 percent. However, the second earner, who unmarried would have faced a 0 percent marginal tax rate as a single, now faces the 22.6 percent marginal tax rate on the first dollar of income earned.
| Unmarried | ||
| Income | $50,000 | $0 |
| Marginal Rate on next dollar of income | 32.60% | 0% |
| Married | ||
| Income | $50,000 | $0 |
| Marginal Rate on next dollar of income | 22.60% | 22.60% |
| Change in Marginal Rate | -10.00% | 22.60% |
According khổng lồ the Congressional Budget Office, these changes in marginal rates matter. The tax effect of marriage motivated higher-earning spouses (such as the spouse that earned the $50,000) lớn work between 0.1 và 0.3 percent more than they would if they had remained single, due to the lower marginal tax rates on average. Meanwhile, second earners in the household worked 7 percent less, due lớn the higher marginal tax rates they now face. Overall, the CBO found that the earnings of couples who file jointly are between 0.7 & 1.2 percent lower than they otherwise would have been if they remained single.<3>
Fixing the Marriage Penalty
The reason there are marriage penalties & bonuses is that the U.S. tax code simultaneously attempts lớn satisfy three conflicting goals: equal treatment of married couples, equal treatment of married and unmarried couples, & progressive sầu taxation.<4>
In order to completely eliminate marriage penalties or bonuses in the tax code, it would require giving up one of these goals. For example, if the United States created a perfectly flat individual income tax with no provisions such as the Child Tax Credit or Earned Income Tax Credit, marriage penalties and bonuses would be eliminated. Likewise, if the United States kept its current progressive sầu individual income tax, but eliminated the ability for married couples to tệp tin jointly, there would also no longer be a penalty or bonus for marriage.
Changes that would eliminate marriage penalties and bonuses would drastically impact the current distribution of taxes paid & would be politically difficult to accomplish. As a result, Congress has opted lớn incrementally reduce the effects of the marriage penalty rather than obtain complete neutrality. In 2001, Congress passed a bill that widened the 15 percent tax bracket for married individuals.<5> Most recently, Congress limited the marriage penalty in regard lớn the Earned Income Tax Credit. This 2009 resize increased the màn chơi of income at which the EITC phased-out for married couples. However, this was only a temporary measure và will expire in 2017. This means many low-income families will face larger marriage penalties when this provision expires.<6>
Conclusion
Marriage penalties và bonuses are a way that the income tax code currently violates the principle of neutrality. These penalties & bonuses potentially affect people’s behavior, especially whether khổng lồ work. It is possible to lớn completely eliminate both marriage penalties và bonuses, but it would require a significant overhaul of the tax code that drastically changes the current distribution of income taxes paid. Short of a complete overhaul, it is possible khổng lồ reduce marriage penalties in the tax code, such as a permanent extension of marriage penalty relief for the Earned Income Tax Credit và widening the income tax brackets for high-income taxpayers filing jointly.
Methodology for Data Calculations
In order to measure marriage penalties & bonuses for incomes between $10,000 và $1,000,000 a few simplifying assumptions were made:
All taxpayers use the standard deduction.All taxpayers only report wage income.All couples, before marriage, minimized their tax bill by claiming dependents in the most tax efficient manner. This also implies that couples cohabitated before và after marriage.Head of Household filing status was used when possible.The following provisions were modeled:
The standard deductionPersonal exemptionsAll three filing statusesThe Earned Income Tax CreditThe Child Tax CreditThe Alternative sầu Minimum TaxThe Phases-out of the Personal ExemptionPayroll Taxes (Medicare and Social Security)The Medicare Surtax
