Happy Tax Day
Matthew Martin 4/15/2013 03:28:00 PM
One comment I hear sometimes is that the solution here is to just take marriage out of the tax code entirely. For example, here's Rand Paul:
"Take the word marriage out of the tax code, that way it will not exclude same sex couples."Maybe this appeals to a libertarian mindset Rand Paul caters to, but of course it is a rather backhanded way of addressing the question since Paul actively opposes same-sex marriage. But this post isn't really about same-sex marriage; it's about why marriage is in the tax code in the first place.
First things first: there is no tax benefit just for being married. This is by far the biggest misunderstanding people have about the tax code--they think that checking "married" on the tax form some how qualifies them for some mysterious deduction somewhere. Not so. Here are the Federal Income Tax brackets for 2013 (source: Tax Foundation; also, bear in mind that these don't include payroll taxes, but that's not important for our purposes).
Notice that the dollar thresholds for each bracket are double for the married couple compared to the single person. But, there are two income earners in the married couple, compared to only one income earner for the single person. So a married couple where each partner makes \$30,000 a year actually pays the same tax rate as a single person making \$30,000 a year.
Now suppose that the married couple where each makes \$30,000 a year decides to have kids. Pursuant to that goal, they decide that one partner will work twice as many hours, earning \$60,000 per year, while the other partner stays at home to take care of the kids, earning \$0 per year. Their family income hasn't changed, and if they file jointly, neither has their tax liability. But if we take Rand Paul's advice and force the married couple to file separate tax returns as single people, then suddenly having a stay-at-home parent pushes them into the 25% tax bracket, instead of the 15% tax bracket they enjoyed when they were both working. This despite the fact that together, the married couple's income hasn't changed.
Thus, if we take Rand Paul's advice, the tax code would actually be actively punishing couples with a stay-at-home or part-time parent. It would be government dictating how couples should divide labor between themselves. The true libertarian stance, then, is actually to keep marriage in the tax code, and extend the privilege to anyone and everyone who wants to form a partnership. Ok, maybe this was a little about same-sex marriage.