Marriage And Taxes

Getting married is the greatest day for 50 percent of couples. The other 50 percent get divorced. Maybe it has something to do with the marriage tax penalty.

Family Values - Barely 

For all the chatter from politicians about family values, it is ironic that the tax code in reality penalizes people who get married.  At its heart, the tax code is designed with the intention of modifying behavior.  Deductions and credits are offered in areas where the politicians wish to promote and taken away in areas that are considered less positive.  Home ownership is seen as a good thing, thus mortgage interest is tax deductible.  On the other hand, things like cigarettes are bad for you, so they're taxed like there’s no tomorrow.  If you buy this argument, one must question why married couples suffer under the tax code. 

A new study found that by getting married, couples are forced to pay around $1,500 in additional taxes.  Referred as the marriage tax penalty, one should wonder what the government is up to.  Is it attempting to promote family values or not?  The digits would appear to indicate not. 

The marriage penalty is a spiteful little development for newlyweds.  This penalty happens since married couples are required to pool their earnings when they report taxes.  Usually, this means their pooled earnings move them into a higher tax bracket and they pay more taxes.  For example, assume husband makes $45,000 a year and wife makes the same amount.  As a married couple, their pooled income is $90,000 with the accompanying tax consequences.  For really doomed couples, the combined income will in fact kick in the alternative minimum tax.  The AMT approximately voids lots of major deductions.  In the tax industry, there is a nickname for this type of situation - the divorce tax. 

The marriage penalty tax has existed for years, yet the politicians have not succeeded at finding a fix.  They pay lip service to the thought, but no major changes have been made to fix the problem.  The best they've come up with is doubling the average deduction for married couples, but this has had small impact since the majority of couples itemize their deductions. 

It seems as if the marriage tax penalty is here to remain for the foreseeable future.  One has to wonder why our family values President didn't include a fix in his tax cuts.