Not Too Separate or Unequal: Marriage Penalty Relief After Obergefell
October 22, 2015 | 91 Wash. L. Rev. 1073
Mitchell L. Engler & Edward D. Stein
Abstract: Joint tax returns have generated controversy for many years. Married couples with the same joint income pay the same tax under our current system regardless of the earnings distribution between the spouses. This approach primarily rests on the idea that married couples share resources and operate as a single economic unit. Critics typically challenge this assumption and lament how marriage might significantly change a couple’s taxes. Depending on their earnings breakdown, a couple’s taxes could be reduced (a marital bonus for uneven-earners) or increased (a marital penalty for even-earners). These possibilities exist because the joint brackets are typically larger–but not twice as large–as the unmarried brackets.
Recent Supreme Court decisions about same-sex marriage revitalize this debate since many same-sex couples face the marriage penalty. In response, some recent commentators propose the elimination of joint returns. However, such elimination faces serious roadblocks, including political concerns and tension with marriage’s collaborative character. While higher joint bracket allowances likewise would provide penalty relief, this would increase both marital bonuses and the associated revenue loss.
We propose instead a unique solution to the current standstill: an option for married couples to calculate their tax on their separate earnings. These separate amounts would be combined on a joint return. The new separate brackets would be more than half the joint allowance but less than the singles cap. This range permits maximum flexibility to balance revenue concerns with other important values. Further, our approach would provide significant penalty relief without any undesired impact on bonuses. It also would maintain our deeply ingrained joint return system. Finally, we demonstrate the superiority of our proposal over other suggested compromises.Download Full Article
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