December 10 2012
Let's Talk Marriage Penalties
Tax rates and spending are getting a lot of attention as lawmakers debate how to avoid the "fiscal cliff" coming at us this New Year's. Well, let me rephrase that: Tax rates are getting a lot of attention. (Spending?...crickets)
And we hear a lot about fairness. Some, like President Obama, are suggesting that high earners pay a higher tax rate for the sake of fairness.
So while we're on the subject of taxation and fairness, how's this for a suggested reform? Get rid of the marriage penalty! This phenomenon, still ridiculously active in most states, punishes a group of people near to our hearts at IWF: working moms. A singleton like me could be doing the same job for the same income as the working mother across the street... except for I'd get to keep more of my money. Now, that's bizarre.
How does it work? Many married women, especially moms, seek out part-time or flexible work. These jobs frequently pay less than their husbands' full-time jobs (as they should - we aren't talking about "equal work" here). But then when you add up the household income, even when women are "married filing separately" they are taxed at the household income rate rather than paying taxes on their income as they would as singles.
And the situation is even worse for women who attempt to be entrepreneurs or freelancers and become their own boss. As Ashley McGuire writes for Weekly Standard magazine in her piece "The War on (Married) Women:"
The government penalizes most harshly the professional situation that is most desirable for many women: self-employment. A self-employed woman will always pay taxes at a higher rate than that of her salaried husband earning the same amount. The “self-employment tax” hits the independently motivated worker (regardless of sex) with both the employer and employee contributions to Social Security and Medicare. There is no reason to exempt self-employed women from paying into Social Security and Medicare like everyone else. But the fact remains that a woman making a living as an independent contractor sees less of her income than a woman with a boss.
Last time I appeared on "To the Contrary," a PBS show, I mentioned how important it is for women to have the opportunity to be self-employed. Delegate Holmes-Norton of Washington, D.C., sort of laughed my suggestion off, as if self-employment were only an option for college-educated elites (hint: it's not). Whatever you think of self-employment, the marriage penalty goes beyond even taxes and reaches into many government assistance programs, punishing even financially challenged women for saying "I do."
One solution? Everyone could just get divorced and avoid marriage entirely.
Hm... Somehow I feel like there's got to be a better solution. As the Tax Policy Center points out, marriage penalty relief can be "costly." They mean that changes to the tax code allowing married couples to avoid a penalty and keep more of their money mean reduced revenues for the government. But you know what's even more costly? Extraordinarily more costly is a culture that penalizes marriage. Among the top causes of poverty are divorce and out-of-wedlock births.
And while the President is seemingly concerned with fairness in his suggested solutions for tax policy changes... he should consider the unfair nature of marriage penalties. He may have won the women's vote handily, but married women would have elected Romney by a 7-point margin. Perhaps this happened because married women understand the tax and subsidy "war on women" (or what might simply be called a "war on marriage" as it affects men, too) and the impact it has on our society.