The tax code still contains what’s come to be known as a “marriage penalty”—i.e., as a result of filing jointly, many married couples face a higher tax rate than they would if each individual filed separately. A new
Marriage penalties are predominantly borne between two groups of two-earner couples: (1) low-income two-earner families filing for the earned income tax credit (EITC) and (2) low- and middle-income two-earner couples for which the two salaries are roughly equal (for example, see the section “Under Current Law” in the table). These marriage penalties are strongest among low-income households utilizing the EITC, the same households that would potentially benefit most from the acclaimed sociological benefits of marriage. Where marriage bonuses are present, the tax code discourages labor force participation among secondary earners, predominantly women. A higher marginal tax rate for a single-earner household more strongly depresses the economic return of a potential secondary earner. On their own and not married, the secondary earner could experience an entry marginal tax rate of 10 percent rather than 25 percent or higher. As a result, certain economic growth and productivity is forgone as a consequence of the married filing status requirement. An ideal tax code would be neutral with respect to marriage; in other words, the decision to enter into marriage would not be adversely affected by the tax code.
The authors also observe that studies have found higher marriage penalties are associated with a greater incidence of divorce. [“Taxing Marriage: Microeconomic Behavioral Responses to the Marriage Penalty and Reforms for the 21st Century,” by Jason J. Fichtner and Jacob Feldman, Mercatus Cener, September 2012]