Tax Reductions, Tax Changes, and the Marriage Penalty

• Published in: National tax journal 2001-09, Vol.54 (3), p.455-472
• Main Authors: Whittington, Leslie A., Alm, James
• Format: Article
• Language: English
• Subjects: Adjusted gross income; Alternative minimum tax; Changes; Couples; Divorce; Earnings; Economic conditions; Fines & penalties; Households; Income taxes; Joint tax returns; Liability; Management; Marriage; Married people; Personal income taxes; Relief provisions; Single status; Single tax system; Studies; Subsidies; Tax brackets; Tax deductions; Tax liabilities; Tax rates; Tax reform; Tax returns; Tax subsidies; Taxation; Taxpaying
• ISSN: 0028-0283; 1944-7477
• DOI: 10.17310/ntj.2001.3.03

Policymakers have directed much effort towards reducing or eliminating the so-called "marriage penalty" present in the U.S. individual income tax. However, because the marriage penalty is frequently misunderstood, many suggested remedies do little to reduce the penalty, and in some cases even exacerbate it. In this paper we use the recent income tax reduction proposal of the Bush Administration to highlight some of the challenges involved in reducing the marriage penalty. Using representative couples with varying distributions of income and family structure, we contrast the marriage penalties under current tax law (as of May 2001) with those under the tax structure in the Administration's proposal. Our calculations indicate that it is certainly feasible to reduce the marriage penalty. However, our calculations also indicate that achieving this goal can be a difficult task, with tax reductions and other tax changes sometimes having unintended and unanticipated effects. In particular, the Bush tax plan does not eliminate the marriage tax, and in some cases actually makes the marriage penalty even larger than it is at present. In short, reducing marriage penalties is not as simple as reducing income taxes.