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The marriage penalty in the United States refers to the higher taxes required from some married couples filing that would not be required by two otherwise identical single people with exactly the same income, as well as the higher taxes that one partner to a marriage may pay on marriage, while the other partner receives a "marriage bonus" or lower taxes. Multiple factors are involved, but in general, in the current U.S. system, the earner in a single-income couple usually benefits greatly from filing as a married couple, while the nonearner in a single-income couple and both earners in dual-income couples receive "marriage penalties" whether filing jointly or separately. The percentage of couples affected has varied over the years, depending on shifts in tax rates.
One source of the marriage penalty has its roots in the progressive tax-rate structure in income-tax laws – that is, the earner of a higher income pays a higher rate of tax on the last dollar of taxable income. For example, the following chart shows the US federal tax rates for 2013
|Marginal Tax Rate||Single||Married Filing Jointly or Qualified Widow(er)||Married Filing Separately||Head of Household|
|10%||$0 – $8,925||$0 – $17,850||$0 – $8,925||$0 – $12,750|
|15%||$8,926 – $36,250||$17,851 – $72,500||$8,926 – $36,250||$12,751 – $48,600|
|25%||$36,251 – $87,850||$72,501 – $146,400||$36,251 – $73,200||$48,601 – $125,450|
|28%||$87,851 – $183,250||$146,401 – $223,050||$73,201 – $111,525||$125,451 – $203,150|
|33%||$183,251 – $398,350||$223,051 – $398,350||$111,526 – $199,175||$203,151 – $398,350|
|35%||$398,351 – $400,000||$398,351 – $450,000||$199,176 – $225,000||$398,351 – $425,000|
Under these tax rates, two single people who each earned $87,850 would each file as "Single" and each would pay a marginal tax rate of 25%. However, if those same two people were married, their combined income would be exactly the same as before (2 * $87,850 = $175,700), but the "Married filing Jointly" tax brackets would push them into a higher marginal rate of 28%, costing them an additional $879 in taxes.
In the most extreme case, two single people who each earned $400,000 would each pay a marginal tax rate of 35%; but if those same two people filed as "Married, filing jointly" then their combined income would be exactly the same (2 * $400,000 = $800,000), yet $350,000 of that income would be taxed as the higher 39.6% rate, resulting in a marriage penalty of $32,119 in extra taxes ($16,100 for the 39.6% bracket alone, plus the remainder is due to the higher phase out of the lower brackets.)
On the other hand, some taxpayers may benefit from joint filing. For example, consider two single people, one with an income of $100,000 (and therefore paying a marginal rate of 28%) and the other with no income (and therefore paying no income tax). By being married and filing jointly, their combined income would be taxed as the lower 25% rate, for a net tax savings of $364.
"Stacking effect" problems occur when two partners to a marriage have different levels of earned income, or one partner has no earned income. In this case, because of Income splitting, the greater earner gets to reduce his/her tax bracket because part of his/her income is "split" and fictionally becomes earned income of the other spouse; this is thus a "marriage bonus" for the greater earner. The lesser earner faces a higher tax bracket than s/he would being single because some of the other spouse's earned income is fictionally attributed to him/her and thus a "marriage penalty". This has an accelerating effect over time in a marriage, placing increasing incentives to allocate labor in the family such that one partner holds all earned income and the other does unpaid labor, such as childcare.
The US tax code allows taxpayers to claim deductions (such as charitable contributions, mortgage interest, or payments for state taxes) on their income. Taxpayers can choose either an automatic standard deduction or else can choose to itemize their deductions. Two single people filing separate returns can each choose the deduction policy that benefits them more, but a married couple filing a single return will both be forced to use the same method. For example, if one person has no significant deductions then that person can take the standard deduction ($6,100 as of 2013). A different person who has, for example, $10,000 in charitable contributions would be better off itemizing his deductions. If the two people are allowed to file separate tax returns, then each can claim the deduction policy that benefits them the most, and their total combined deduction would be $16,100 ($6,100 + $10,000). But if the two people are combined on one "Married, filing jointly" tax return, then they would be forced to choose either itemizing their deductions ($10,000 combined) or else using the standard deduction ($6,100 per person or $12,200 combined). Either way, the married couple would receive less deductions than two otherwise identical single people with exactly the same income.
The marriage penalty can be even worse in cases where one spouse is not a citizen or resident of the United States. In this case that spouse cannot be required by US law to pay US taxes. However, since the US person is still required by law to file taxes on worldwide income, this leaves two choices. The US person can either file as 'Married Filing Separately' (or 'Head of Household' if they have at least one qualifying person who is not their spouse), or else try to convince their spouse to voluntarily pay US income taxes on their income by filing a joint return. The first alternative requires using the 'Married Filing Separately' or 'Head of Household' tax brackets, which are less beneficial than 'Married Filing Jointly'. The second choice allows that person to use the more favorable 'Married Filing Jointly' tax brackets, but also requires paying tax on the non-US person's income, which would not be required for two otherwise identical single people.