Marriage Penalty - Origin and Actions To Eliminate

Origin and Actions To Eliminate

The marriage penalty originated in 1969, when Congress tried to offset what was then an advantage for couples compared to single taxpayers.

In 1996, 42% of married taxpayers paid more because they were filing jointly than they would have if they had remained single according to a 1997 Congressional Budget Office (CBO) analysis. The average penalty among these couples was $1,380. Conversely, the same CBO analysis concluded that 51% of married couples paid less tax jointly than they would have collectively paid if they were not been married, with average savings of $1,300. The reason that one couple would receive a benefit while another would receive a penalty sits in whether the couple's individual incomes were disparate (resulting in a benefit) or roughly equal (resulting in a penalty).

Since then, several pieces of legislation have been passed to do away with the penalties further. For example, the Economic Growth and Tax Relief Reconciliation Act of 2001 introduced section 1(f)(8) to the Internal Revenue Code, which mitigates the marriage penalty effect in the lower tax brackets. Section 1(f)(8) adjusts the ceiling of the 15% tax bracket for joint return filers relative to the ceiling of the 15 percent tax bracket for unmarried spouses.

The Jobs and Growth Tax Relief Reconciliation Act of 2003 accelerated the benefit to joint return filers by eliminating the marriage penalty for 2003 and 2004 and the Working Families Tax Relief Act of 2004 extended the benefit to 2005–07. Therefore, the marriage penalty in the lower tax brackets will be eliminated through 2010. Unless reauthorized by Congress, however, the marriage penalty will return in 2011. However, through passing those pieces of legislation, the tax system is now such that couples with disparate incomes will pay less tax than they would have paid as two single taxpayers.