ISSUE ANALYSIS

a division of Home School Legal Defense Association
February 17, 2000

Marriage Tax Penalty—A Tax Families Can’t Afford

Update on Marriage Tax Penalty:

Thank you for your calls on H.R. 6—the Marriage Tax Penalty Relief Bill.

Although the phrase “H.R. 6” has become synonymous with a 1994 legislative battle home schoolers fought against a federal teacher certification mandate, this year’s H.R. 6 is actually a good thing for families. The Marriage Tax Penalty Relief Bill proposes to incrementally eliminate the IRS’ unequal treatment of married vs. cohabiting couples.

On Thursday February 10, H.R. 6, the Marriage Tax Penalty Relief Bill, passed the House of Representatives. Last year, President Clinton vetoed a similar bill that would have provided $117 billion in marriage penalty relief. However, in his State of the Union Address this January, the President changed his mind and announced his support for marriage tax penalty relief. Conservatives saw this as a green light and charged ahead with new plan, even better than the 1999 bill. However, the president is now saying that this new tax penalty relief bill is too much too fast.

What Does the House Marriage Tax Relief Bill Do?

The House version of the Marriage Penalty Tax Relief Bill will immediately double the standard deduction for all married couples to $8,800 and gradually raise the income bracket subject to the lowest tax rate of 15 percent, from $43,850 to $52,500. This bill gives relief to all families, not just those with one income.

What is the Marriage Tax Penalty?

Our current tax code levies taxes on some married couples at a higher rate than single individuals, whether or not married couples file joint or separate tax returns. This penalty does not affect one-income families—only two-income families. According to the Congressional Joint Committee on Taxation, the penalty begins when a married couple’s combined incomes equal a 30-to-70 percent split—when one spouse earns 30 percent of the income while the other earns 70 percent. The penalty increases the closer they get to a 50/50 division. The Congressional Budget Office estimates that 42 percent of married couples incurred a marriage penalty in 1996; more than 21 million married couples paid an average of nearly $1,400 in additional taxes in 1996.

What is the Problem in the Tax Code?

The marriage tax penalty arises from a combination of three different injustices in the federal tax code:

  1. The federal tax code phases out The Earned Income Tax Credit for qualifying married couples more quickly than it does for single taxpayers.
  2. Married couples who do not itemize receive a standard deduction less than the standard deduction for two unmarried taxpayers.
  3. Married couples who file separate returns fall into the 15-percent tax bracket beginning at a taxable income of $18,450 while single individuals are not taxed until their taxable income reaches $22,100. This same discrepancy continues up into the 28, 31, 36 and 39.9 percent tax brackets.

The new House bill attempts to remedy these problems two ways. First, it makes the standard deduction for all joint filers exactly double that of a single filer. Second, it expands the 15 percent bracket for all joint filers so that the cutoff for taxable income is exactly double that of a single filer.

How Does the Marriage Tax Penalty Affect America?

The marriage tax penalty is inherently anti-family and rewards an immoral lifestyle. It encourages single individuals to avoid the tax penalty by cohabiting instead of marrying. By avoiding marriage and living together, these couples’ tax savings can be significant. For example, a cohabiting couple who have a combined a taxable income of $40,000 per year ($20,000 each) would pay total taxes of $7,492. However, if they married, their tax would equal $8,480—nearly $1,000 dollars more. Clearly, the marriage tax penalty relief is more than just a fix in the tax code, it addresses a moral question with national significance. By discouraging marital commitment, this marriage tax penalty has been undermining the very fabric of our nation—the family

The marriage tax penalty also discourages spouses (usually wives) from entering the workforce and consequently encourages lower economic productivity. Keep in mind that this penalty does not affect one-income families, only two-income families. At first glance it would seem this tax penalty has little impact on most home schoolers since the mother is teaching the children at home and the father is the single income earner. However, many home school mothers have home-run businesses which generate a significant amount of the family’s revenue. Furthermore, the recent advancements in computer technology are opening up more opportunities for families to begin their own home businesses. In this light, the marriage tax penalty does place pressure on home school families to stay at one income.

The virtuous wife in Proverbs 31 is a biblical example of a industrious women who would be taxed higher under our current IRS code. Verses 16 through 19 says she buys land and plants a vineyard, her merchandise is good, she puts in long hours and she works on the spindle. Clearly, Scripture is pointing out the virtues of an industrious mother. However, the marriage tax penalty discourages this virtue by penalizing families who have two incomes.

In conclusion, the marriage tax penalty is in direct conflict with the family and the sanctity of marriage. If America is to remain great, she must preserve and reward the institution that holds her together and trains up the next generation. She must preserve marriage and the family.