I got into a debate with my girlfriend’s uncle the other day, and he is anti-gay marriage. His focus was mostly on the economic side of things, claiming that since they do not procreate, they should not receive tax benefits.
Unfortunately I was ignorant about much of why our taxes are set up the way they are so next time I go into “battle” I’d like to come armed with some facts. I assumed that tax breaks for married couples were nebulous at best (sometimes worse, sometimes better, not sure why in either case), and child credits were mainly because of the costs of raising a child (as opposed to labor), but again I don’t know the reasons behind why these things are the way they are.
Of course, this is all independent of the “Well, they want to be treated equally” argument.
One of the uses of taxes is for the government to promote desirable behavior. The belief is that families are generally more stable and less likely to engage in risky or criminal behavior than individuals (There’s a reason riots are mostly drunk college kids rather than families of six). Therefore, the government wants to encourage people to form nuclear families as a way of promoting a stable and family-oriented environment.
Given the ongoing evolution of what we believe to be a “normal” family, these notions are subject to some debate.
There isn’t always a good answer to “why?” questions when it comes to the tax code. I would say that credits and deductions for children have more to do with being popular than anything else - the rest of the conversation is a retroactive justification for what was basically some senator’s or President’s campaign pitch.
There is not a tax break just for being married. As you point out, some couples come out better that way (especially those with a single wage earner) and some come out worse.
Of course, many homosexual couples do procreate, such as through artificial insemination. And of those who don’t, some choose to adopt.
One good reason for allowing joint filing at the federal level for homosexual couples: It would eliminate a sort of limbo that they’re in right now. A couple in CA, for example, must use married filing joint as their state status, but they must file their federal taxes as single, with a fairly ridiculous allocation of community property income between the two. Even the IRS seems confused about their own instructions on how to do this.
I think the basis for the married tax advantage goes back to when the man was the breadwinner and the wife was not employed. More of his expenses go to supporting his wife and children than a single person, so he has less income to go towards taxes.
A single person who makes $50k has $50k to spend on himself. A married person making $50k may be putting part of that income towards feeding and housing several non-working people. If the single and married person both had the same tax burden, it would have a greater impact on the married person since he has less disposable income.
It doesn’t make as much sense now that both married spouses often work. Since they share expenses, a couple who makes $25k each ($50k total) probably have more disposable income than two single people making $25k each.
I still think it makes sense to have a child tax credit since children are huge expenses. The costs for food, clothing, housing, childcare, education, entertainment, etc really add up. A childless person is going to have lots more disposable income compared to a similar person with a child.
Well, one argument* is that the tax code isn’t the best place for social engineering - that the government should be taxing people to generate revenue, not to influence behavior. That ship has pretty much sailed, though.
*whether this is a “good” argument likely depends on your political leanings.
It’s called the “marriage penalty”. Only a slight majority (51%) according to a 1997 CBO analysis pay less in taxes after marrying. (Anybody got any more recent numbers?) I know my accountant warned me about the penalty when I got married, and there was some reason that “married, filing separately” didn’t dodge the extra taxes.
I don’t understand the question. It seems self-evidently to be consistent with progressive taxation.
If you agree with the general concept that richer people should pay a higher percentage of their income in taxes, then it would naturally follow that you would have to allow for family size in defining rich.
A family of 6 with a combined income of $100K is not nearly as wealthy as an individual with an income of $100K, and so on.
The marriage deduction came from a time when most families who paid income tax had a single wage earner. Since it was more expensive for two people to live than one, the idea was to counteract those extra expenses by giving a different tax rate. It was the same for deductions for children: the cost of raising child added expenses to the family, so it was only fair to make an allowance.
The thinking had nothing to do with getting any socially desirable result: that’s putting 21st century thinking in the heads of people a century ago. There was no reason to urge people to get married and have children; there really weren’t many other options other than living alone; living with another person of opposite sex was scandalous (and would only be done by people who didn’t earn enough money to pay income taxes*). Having children without being married was even worse. There was no need to give anyone an incentive to do it (and the idea of a tax incentive came later, anyway).
So it boiled down to the matter of fairness. Someone earning $5000** and living alone had fewer expenses that someone earning $5000 with a family of four. The family has more expenses – living quarters, food, clothing, etc. – so the same tax rate would make it hard for them to make ends meet.
*In the beginning only the top earners paid any taxes at all. I don’t have the figures handy, but it was around the top 10% or so that earned enough to file a return.
**Not a bad salary for 1920, though probably not enough to have to pay taxes.
It’s not only that- most married couple mingle their finances. Altho wage income clearly belongs on one returns or the other, how about interest income from a Joint account? Or deductions, such a home mortgage interest on a home they both own? No system of dividing that sort of stuff would be fair to all, so filing Joint simply allows the return to show what is the reality- the income and expenses are intermingled. We also have no desire to make those people pay more than singles. Thus, we need some jiggery-pokery to makes things come out fair. The mostly single-income family is traditional, so the jiggery pokery was aimed at those types of taxpayers. We had to add some add’l funny stuff to make two-earner families not pay MORE.
The Wikipedia section has a editorial comment that the information is out of date.
I don’t have any equivalent numbers to the CBO’s analysis, but I do know that 2002 legislation went a very long way toward eliminating a marriage penalty. Right now, the “penalty” mostly exists for couples who are unmarried, have kids, and who take standard deductions or certain child-based tax credits.
For example: 2011 MFJ standard deduction is 11,600, Single is 5,800 and Head of Household is 8,500. An unmarried couple with kids could get one Single + one HOH rate for 14,300 in total deductions. The extra 2,700 in deduction is worth something like $400-800 less in tax (depending on tax brackets).
As another example: 2011 Earned Income Credit expires at $49,000 in income even for married couples with three kids. If you have two adults making $25k each, they are denied the credit if married ($50k total income is too high). If they’re not married, one of them can take the credit based on their $25k. That scenario has a difference of about $4,000 in tax.
(Even worse: many taxpayers get away with breaking all kinds of rules - like both of them claiming HOH and EIC. While not in compliance with tax rules, the IRS misses a lot of this and can’t afford to audit everyone.)
There is. “Married filing separate” has a different tax schedule which is worse than “single.” I can understand this because it makes more work for the IRS to do two forms than just one.
That’s often true but not always. A lot depends on deductions and relative incomes of the two. Depending on a complicated list of factors you can pay anything from much more to much less if you are married. Some deductions, like mortgage interest, are shared. Others, like medical expenses, can be assigned to one or the other.
There is a massive tax break for married couples when one of them dies – the survivor inherits with very little taxes on that inheritance (unless it’s huge). But for a gay couple, the surviving spouse will pay taxes at a high rate (to say nothing of losing Social Security survivor & death benefits, pension plans, etc.).
Of course, a lot of these policies go backto the times when in general, the wife stayed home or had a small job and the husband earned the money.
The expenses of a family were higher than for a single person, a topic beaten to death above. With one household, there was only one set of deductions.
Also, when the husband died (usually he died firs,t after doctors sterilizing their hands for childbirth became common); usually the property was in the husband’s name, so logically either the widow had to sell the house to afford the estate taxes and imputed capital gains, or they simply forgave the taxes since otherwise society would have to deal with social services and housing for a huge number of widows.
Once women generally also began earning decent wages, then the tax policy had to be adjusted to account for the penalty that one set of deductions imposed on a household.
If you file “married filing separately” there are many deductions and tax credits that you cannot take as compared to a couple filing “married filing jointly”. I think it is only beneficial if one spouse makes a lot more than the other and the lower paid spouse has a lot of itemized deductions that might not be realized on a joint return (medical bills at the 7.5% income threshold and other misc. deductions)
This is nonsense. It’s a retro-fitting of the original reason for the tax treatment of married couples and their children.
The reason that the tax table is different for married as opposed to single taxpayers is that it was established when single-income families were the norm (usually, the male being the wage-earner). When one went from feeding, clothing and housing one mouth (oneself) to feeding, clothing and housing two mouths (you and your married partner), it was considered necessary to reduce the amount taken away in tax. The exemptions for children were a further concession to the same concept.
Limiting the table to married couples prevented mis-use by those who were simply trying to get around paying taxes. At the time of its establishment, very few couples who lived together were not married, society at the time frowning upon this idea severely.
The switch to two-wage-earner families originally caught the tax code out; the famous “marriage penalty” resulted from the fact that the addition of one spouse’s income to a second spouse’s income resulted in the added income being treated as a marginal boost, taxed at higher rates, which it turned out not only negated the advantage of both spouses moving from the single to the married column, but actually increased the tax to be paid. This issue has been one reason for the struggles of Congress to try and deal with taxes over the last 30 years. IMHO, they should junk the tax code and start from scratch, basing the tax structure upon the assumption of two-wage-earner families and not requiring marriage to obtain that benefit.
Married filing status didn’t even exist until 1949 so the policies that everyone is talking about don’t go back as far as everyone seems to think. Remember, WWII was a period when an awful lot of women had jobs for the first time, and they remained more-employed than ever before even after the war.
So… I think virtually all of the speculation here is BS. It took 36 years to add an MFJ status, and we introduced it at a time when women were entering the workforce.
If it was really about nuclear families and helping the poor, it’d make more sense to introduce it during the Depression.
If I draw any conclusion from the history, it’s that MFJ status was started so that the increasing number of two-income families could file one return each year instead of two.