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Of Public Interest
Volume 2, Number 16
October 2000
The Marriage Tax: Separating Myth from
Reality
by Richard E. Wagner
We have heard a lot recently about the marriage tax. Everyone seems to agree
that a tax on marriage is a bad thing, and for good reason. The family is one of
the central foundations of our society. A tax on marriage, no matter how small,
eats at a foundation that should not be weakened. Among other things, children
fare better when they are raised within complete families. Divorces as well as
single parenthood outside of marriage are hard on children, whatever the
condition of the involved adult might be. A marriage tax is a bad thing however
it is imposed.
Despite the agreement that marriage should not be taxed, the tax continues to
exist. Just this past summer, President Clinton rejected a Republican proposal
to reduce the marriage tax. It is notable that the various participants speak of
reducing the marriage tax. They do not speak of eliminating it. It is worthwhile
to ponder why this is so. To start, we should note that to speak of a
"marriage tax" is to speak metaphorically and not literally. There is
no such thing as a marriage tax in the United States. The closest we come to one
are the small fees that couples are charged for marriage licenses.
The so-called marriage tax is a feature of our personal income tax, whereby
tax liability can vary with marital status. A married couple may pay a larger
tax than what the two of them would have paid had they remained single or
obtained a divorce. Suppose the husband and wife each has $30,000 of taxable
income. This $60,000 of taxable income would create a federal tax liability of
$11,294. Had those people remained single, or, alternatively, had they divorced,
their combined tax liability would fall to $10,210. Either way, being married
imposes a 10.6 percent tax penalty on this couple. (The marriage tax can also
work through the standard deduction. For a married couple the standard deduction
is $7,100. As single people the combined standard deduction is $8,500.)
Our tax system, however, does not always impose a higher tax on married
couples. Sometimes it awards a marriage bonus. Suppose the couple still has
$60,000 of taxable income, only now all of it is earned by one of them. As
single people, the pair would have a combined tax liability of $13,504. Marriage
reduces their tax liability by 11 percent, to $11,295. There is a marriage bonus
in this instance.
Whether there is a marriage tax or a marriage bonus is an arbitrary matter
that depends on the relative earnings of the spouses. The more nearly equal are
their earnings, the more likely it is that a couple will pay a marriage tax.
Conversely, as their relative earnings become less equal.
Dr. Richard E. Wagner is Public Interest Institute's Academic Advisory Board
Chairman
and Holbert L. Harris Professor of Economics at George Mason University.
Permission to
reprint or copy in whole or part is granted, provided a version of this
credit line is used: "Reprinted by permission from OF PUBLIC
INTEREST, a publication of Public Interest Institute."
The views expressed in this publication
are those of the author and not necessarily those of Public
Interest Institute. They are brought to you in the interest of a
better-informed citizenry.
A Publication of:
Public Interest Institute at Iowa Wesleyan College
600 North Jackson Street
Mt. Pleasant, Iowa 52641-1328
Phone: 319-385-3462 Fax: 319-385-3799
E-Mail: public.interest.institute@limitedgovernment.org Web Site:
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