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1 Claire M. Hintz, The Marriage Penalty 1 (1998)

handle is hein.taxfoundation/srhhxz0001 and id is 1 raw text is: TAt FOUNDATION March 1998 No. 77 an iage enaby Many elements of the tax code vary with marital status, including the amount of the standard deduction, the earned income tax credit, and the tax rate schedule. All of these differences can cause a married couple to have Figure I Distribution of Marriage Penalties and Bonuses by Size of Adjusted Gross Income, 1996 Less Than $20k o\0 Percent with Marriage Penalties F1$20k-$50k 0o Percent with Marriage Bonuses More Than $50k Percent with Neither Source: Congressional Budget Office. a different tax liability than two similarly situated single people. A married couple filing jointly incurs a marriage penalty if their tax bill is higher than the combined tax bills that they would have paid if each could have filed singly. Similarly, a married couple receives a mar- riage bonus when the sum of the individual tax liabilities had they filed singly is greater than their tax liability under a joint return. Marriage penalties result from the conflict between three mutually exclusive goals of the tax system: * Taxes should be progressive (specifically, the progressive marginal tax rate structure); * The tax code should be neutral with respect to marriage; and * The tax code should treat families equally (families with equal incomes should have equal tax bills). Different balances have been struck with regard to these goals over time. Currently, the tax code is not neutral with respect to marriage. The Congressional Budget Office esti- mated that 42 percent of married couples incurred marriage penalties and 51 percent received bonuses in 1996. According to the study, the average size of a marriage penalty was $1,400 and the average size of a marriage bonus was $1,300. ' A Brief History of the Marriage Penalty in the Federal Income Tax The income tax expanded rapidly in the 1940s to finance World War I1. As a result of the increasing number of families subject to the income tax and higher marginal tax rates, more states began to enact community property laws that allowed couples to split their income in half and, as a result, pay lower B V Claire 1. Hintz Senior Economist Tax Foundation )It 11

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