If there is one then why can one “with hold at the higher single rate”?
Single people have more taken out of each check so how is there a marriage penalty?
If there is one then why can one “with hold at the higher single rate”?
Single people have more taken out of each check so how is there a marriage penalty?
How much you have withheld can be controled. It’s what you owe April 15th that counts, and married people do pay more!
And it is a penalty, and it is unfair! Just because I fell in love I have to pay a higher tax? Screw that!:mad:
The marriage penalty is one of those things that appears because of our fun little graduated taxation system. Basically, if two people each make about the same amount, if they paid taxes singly, they are in a lower tax bracket than if they add their incomes together. Thus they pay more taxes by being married.
It generally doesn’t apply to spouses with highly disparate incomes, nor does it really apply to one-income families.
Of course, relief efforts continue to fail because they “disproportionately favor wealthier people.” Well, yeah. They pay more tax to begin with… <sigh>
I hate politicians.
LL
What I’ve been curious about is, if filing jointly would put you in a higher tax bracket, why would you do it? Is there a disadvantage to filing separately?
–sublight.
I’m not sure of this, so please correct me if I’m wrong. This is all from my vague memory from my law school tax class five years ago.
I think the marriage penalty only hits some couples. There are other married couples that actually pay slightly less as a couple than they would if they were two single people.
Married couple have the following advantage: Married couples have lower marginal rates on oncome than single people. For example, a single person earning (after the standard deduction) $23,000/yr. pays $1,180 in New York State income taxes. A married couple pays $964.
On the other hand, the standard deduction for a married couple is less than double the standard deduction of a single person. This is the marriage penalty. So, a single person’s standard deduction is $7,500 in NY, while a married couple’s standard deduction is $13,000 – less than twice the amount the single person gets.
So there is an advantage and a disadvantage to being married. Whether you win overall or lose overall by being married will depend on your income situation. It’s too late at night for me to figure out how this will work exactly and to tell you who wins and loses.
There are some rational reasons for the marriage penalty, although I’m not saying I agree with them. When I say rational, I just mean that the marriage penalty is not just a completely arbitrary decision to punish marriage.
For one thing, married couples have lower overall expenses, since they share housing, food, and other things. So the idea might be that they are effectively wealthier because of their situation and therefore should be taxed at a higher rate. Well, that’s kinda silly, (but not totally baseless). It’s off the mark, especially nowadays with unmarried people shacking up and so many people living with mom and dad or having rommmates.
Another possible reason: its a way to tax income that is not subject to taxation. This is income that a wife who stays at home with the kids produces something of value but she doesn’t get paid for. She does not have to pay tax on what she produces. Suppose the wife went out and got a job and instead of staying home with the kids, and in the job she made exactly the amount needed to pay the baby sitter that watched the kids while she works. The working woman would be in worse off shape because she has to pay tax on what she produces, while the woman who works in the home does not. She is worse off (poorer) for working.
So the marriage penalty may have been a way to tax to some extent the work of the mother in the home. This may go back to the time when most mothers stayed at home with the kids and kids were usually born into married couple situations. Neither of these things is true today.
Please tell me if any of this makes sense. Personally, I think that all people should pay taxes as individuals, at the same rate if married or not.
A mother-in-law.
and a wife til “death do us part”. I mean I have nothing against marriage except that it lasts so long!
My wife and I get hit with that marriage penalty. The lower tax brackets move up for married people, but not by a factor of two.
Virginia is nice on their tax forms. They let you file either jointly (on a single return) or singly, whichever calculates less tax for you. And if filing jointly on a single return, they let you apply the standard deduction of $5000 any way you’d like.
E.g.: the first year we filed as married, my wife’s Virginia Adjusted Gross Income was only $1800 above a tax bracket threshhold. Mine was way above. After taking our $800 exemtion amount, she was only $1000 over. So I applied $4000 SD to me and only $1000 for her. She didn’t think that was fair at first (!), until I made a spreadsheet that showed that at least $4000 shold be on mine to get the maximum refund.
Here’s a thread from February that has a pretty good discussion of this:
http://boards.straightdope.com/sdmb/showthread.php?threadid=12194
In my husband’s and my case, the marriage penalty does exist and it was quite substantial for our 1999 taxes.
Virginia was VERY nice to me- one year I screwed up the filing, and didn’t pick the method that resulted in the lowest tax (I think I did jointly instead of singly). They wrote back a month or two later, saying that I could re-file jointly, to save money (I actually got a refund instead of owing taxes because of that). They even wrote the new numbers on my old form, so I didn’t have to work out the math- I just had to file a new form!
Arjuna34
Yes. There are several disadvantages to filing separately. There also a MFS column in the tax tables.
But if you want to screw a soon-to-be-ex, filing separately has it’s advantages.
If you’re married and filing separately, you still only get 1/2 of the married deduction each. Not the larger single deduction.
There are three basic earning structures the IRS will have to deal with:
Married couples where one spouse doesn’t work or earns much less than the other
Married couples who earn roughly equal incomes
Singles
I don’t have to be an economist to guarantee that there is no way to devise a structure where one of those three groups won’t pay a disproportionate share in taxes.
Daniel Shabbason:
That is correct. However, the marriage penalty is an artifact of having two-income households. In your above situation, only one of the couple is an earner, so the ‘savings’ is really quite minor compared to the opportunity cost that one person has an income of $0.
In your above example, two single people living together and each earning $23000/year will pay $1,180 each in taxes, or $2,360.
If they get married and they are earning $46,000/year as a married couple, and their taxes will go up. I haven’t done the math - if the taxes are not higher than $2360, then there is no marriage penalty in this case. Daniel, want to calculate their taxes? For me, it has in fact been higher (California & Federal taxes.)
Slight hijack- for three years running I’d file my California income tax form and expect a refund, only to get a bigger refund and a note from the state saying “You forgot to take deduction X”. X was always a different deduction I had missed each year, but they figured it out for me. My question: Why the heck did I even have to file?
DanielS above has it right. The marriage penalty is really a misnomer. It should be called, “the married-with-each-spouse-earning-wages-or-salary penalty” because the tax tables were designed with only one wage earning spouse in mind.
> I don’t have to be an economist to guarantee that there is no way to devise a structure where one of those three groups won’t pay a disproportionate share in taxes.
There’s a very easy solution- a flat tax.
I have made the majority of our income and we get hit with 2k-3k more taxes then if we were to file as singles. The penality that gets us is that if one spouse itemized then both must which leaves one of us with basically no deductions. Another factor is deducatbility of student loans which we lost when we got married