Earlier this month, President Clinton vetoed legislation to end the marriage penalty in the federal tax code, charging that the Republican-backed bill was “poorly targeted toward delivering marriage penalty relief.” News reports filed by the Associated Press (AP) backed the President’s assertion, claiming that only some married couples in America are penalized by the current tax code. Many other couples, reported the AP, are actually awarded a marriage “bonus.” That is, they pay less taxes than they would if both partners were single, and the Republican bill would have benefited these couples as well.
In fact, the marriage “bonus” is bogus. It’s a rhetorical ploy, and journalists mislead the public when they report it as a fact.
President Clinton and the AP notwithstanding, there is no marriage “bonus” for any married couple under the current tax code. A husband and wife who earn $50,000 invariably pay more total income taxes than two single people similarly situated who each earn $25,000. This inequity results because the tax code is overtly skewed against those who are married. During the most recent tax year, for example, the standard deduction for married couples was only $7,200, while the standard deductions for two single people totalled $8,600–a difference of $1,400. Even more important, the amount of taxable income a married couple can earn before boosting it into the 28% tax bracket is considerably smaller than for two single people. For the most recent tax year, every dollar a married couple earned above $43,050 in taxable income was taxed at a 28% percent or higher rate. By contrast, two single people could earn $51,500 before being subjected to higher rates. The tax code is clearly stacked against all married people, whatever their income levels.
How, then, can anyone claim that some married couples receive a marriage “bonus”?
The strained reasoning goes something like this: Under the current tax code, married couples in which one spouse earns all of the household income–say, $60,000–will pay less income tax than a single person who also earns $60,000. Only in an Orwellian world would this result be considered a special “bonus” to married persons. Why should a married couple pay the same amount of tax as a single person on the same amount of money? After all, a single person is just that–single. A married couple is by definition two people, and the income is shared between them. It is simple equity, not favoritism, to treat a married couple’s income as effectively split between the two partners.
Marriage is many things–a sacred covenant before God, a civil contract, and a stable way of raising children. But it is also an economic partnership. A husband and wife join together and become an economic team. They share their resources as well as their work. This is true even if one partner stays home while the other works at the office. A spouse who stays home and runs the household enables the other spouse to spend more time working. Thus, the income generated is properly considered the product of both parties. Marriage as an economic institution can best be equated with a business partnership. No one would call it a “bonus” because business partners were each taxed on one-half of the partnership’s income whereas a sole proprietor was taxed on the whole amount.
Those who allege the existence of the mythical marriage “bonus” propose to “target” tax relief to two-wage earner couples who supposedly suffer the most under the current system. But limiting tax relief to two-earner couples is not only manifestly unfair to other married couples, it is also socially counterproductive. Married couples in which one spouse stays at home typically have children, and they choose to forgo further income so that one parent can spend maximum time with their children. Research as well as common sense indicates that small children benefit from having a full-time parent in the home rather than being sent off to day-care. It would be nonsensical for the tax code to actually penalize parents who make this choice.
Congress rightly attempted to end the marriage penalty for all married couples by equalizing tax rates and standard deductions for married persons so that they are equivalent to those faced by two single people. President Clinton’s veto was based on a spurious premise and deserves to be overriden.
John West is a Senior Fellow of Discovery Institute and an Associate Professor of Political Science at Seattle Pacific University.