Charles Brown
>>> Max Sawicky <sawicky at epinet.org> 05/29 4:02 PM >>>
>
> Wasn't there the repeal of one marital deduction during the
> Reagan Administration ?
In the 1981 tax act the so-called marriage tax was reduced but not eliminated by the institution of a two-earner deduction equal to ten percent of the earnings of the lower-earning spouse.
In the 1986 tax act this deduction was indeed eliminated, but at the same time the standard deduction for couples was increased and the tax brackets were collapsed from 15 rates to two rates. The top rate was reduced from 50 to 28 percent (though there were some complicating factors entailing phase-outs). The net effect was to reduce the penalty further.
So on balance there was a penalty before Reagan and one after, though not quite as large.
Note that, in keeping with my previous post, the reduction of the penalty was associated with an explicit reduction in progressivity. The flat tax beloved by House Repubs can not fix the basic problem, since it is not really flat.
Less obvious is that taxpaying units of the same size and the same income (e.g., a single mom and two kids, and a couple filing as married joint with one kid) can owe different tax liabilities. For instance, a couple with one child and income of $100,000 filing a joint return using the standard deduction owes $18,493. A single person with two kids filing as head of household owes $19,811. In this case, you will note, the 'penalty' goes the other way: the single parent pays more. Relief for the couple will widen the disparity, which is irrational to begin with.
Alternatively, we could compare two singles earning $50,000 each with a married couple of equal combined income, and forget about kids to keep things simple. The married couple owes $19,235, whereas each single owes $8,899, or $17,798 in all, a $1,437 saving. Or we could suppose two singles, one of whom makes $100,000, and the other nothing. Their combined tax is $23,903 (all paid by the earner, natch), so they would get a marriage bonus.
Down closer to earth, for a pair of $20K earners, single they pay a combined $3968, married $4,174. Not such a big deal, compared to the joys of connubial bliss.
The main pattern is that marriage increases aggregate liability of singles, but there are many exceptions.
MBS