The Effect of the Tax Code on Marriage

Flickr image by Orin Blomberg.

Marriage and family stability should be encouraged so that children may have the opportunity for a better future. However, the effects of the tax code penalizes marriage. Low-income workers, being more likely to be subject to the marriage tax penalty than middle or high income workers, could be driven to not get married at all or divorce due to more unwanted financial stress (Fichtner and Feldman).

Why would a household with two people each earning the same amount of income (ex. $50,000 annual income per individual) be taxed more than a household with two people each earning different incomes (but still earning a total of $100,000 annually)? Government, it seems, threw being “fair” and promoting “equality” out the window when instituting the tax code. Jason Fichtner, a senior research fellow and Jason Feldman, a research analyst, both under the Mercatus Center, calculated that “For many middle-class families, the tax brackets for married couples filing jointly for any given tax rate is roughly twice the amount as a non-married worker, thereby subjecting more income to a lower tax rate.” While a single-earner household earning $60,000 a year could take home a $3,465 “marriage bonus”, a two-earner household, each person earning $30,000 a year, could be subject to a penalty of $1,083 (Fichtner and Feldman).

To encourage women to stay in the labor force after having children, Obama has two proposals: adding a new tax credit for second earners and tripling the existing tax credit for child care expenses. There are two reasons that the proposal of adjustments to the tax code is “justified” by lawmakers. The first is that because two-earner households would naturally incur higher living costs vs. single-earner households with the same income, two-earner households should be taxed more. But since single-earner households earn less, and because the labor would be divided inefficiently, the first justification doesn’t make sense. The second reason is to keep the tax code progressive, and when applied to families, penalizes marriage which also doesn’t make sense (Ponnuru).

So the tax code, adjusted or left alone, is discouraging marriage. Politicians, wanting to keep women in the labor force and coming up with policies for that purpose, would still and are at present discouraging them from working, and marrying for that matter (Ponnuru).

As with other government policies, the tax code, by penalizing marriage, hits low-income people hard in addition to penalizing high-income people (Fichtner and Feldman). Households with two adults and no dependents are very likely to incur the marriage penalty if annual income is fairly equal or very equal and between $10,000 and $20,000 or between $350,000 and $1,000,000 – obviously burdening the poor as well as well as taxing the rich more while the middle class will likely receive a marriage bonus (Kasprak).


If households are made up of two adults and one dependent and incomes are relatively equal or close to equal, households with an annual income between $30,000 and $60,000 are fined heavily for being married, especially at around $40,000 a year, in addition to households with an annual income between $500,000 and $1,000,000. Once again, hitting the low-income people hard and subjecting the high-income people to more taxes (Kasprak).


And oddly enough, if households with two earners with fairly the same incomes or close to the same incomes have two dependents and earn between $15,000 and $70,000 a year, are penalized heaviest among people having no dependents, one dependent, and two dependents. People earning between $500,000 and $1,000,000 are likely to incur a marriage penalty as well if the earners have fairly the same incomes or close to the same incomes (Kasprak).


To summarize, Richard Morrison of the Tax Foundation explains what is going on: “Marriage penalties tend to affect low income and high income couples, but not middle income ones—low income couples because of the marriage penalty inherent in the structure of the Earned Income Tax Credit (EITC) and high income couples because the 28 percent rate bracket and above for joint filers begins at less than twice the amount for single filers. Middle income couples are much more likely to receive a marriage bonus simply because there is no penalty inherent in the bracket structure for the 25 percent rate levels and below—for joint filers, each bracket begins at exactly twice that for single filers” (Morrison).

Staying true to its design, the marriage tax discourages work. A stay-at-home member of a family receiving a bonus is discouraged from returning to work because joint-filing says that for the stay-at-home family member to return to work, he or she must be subject to the tax rate of the other head earner’s next marginal dollar of income – for example, if the other head earner’s income was $60,000 – the rate would be 25%, instead of the single filing rate of 10%. “Although married individuals have the option of filing separate tax returns, filing under the tax status ‘married filing separately’ imposes limits on tax deductions, narrower tax brackets, and higher marginal tax rates” (Fichtner and Feldman).

Two-worker families with relatively the same incomes have the choice of earning less income and being married, or being married and earning less income, but probably providing a more stable home for children (Fichtner and Feldman).


Mainly, the low-income people are ironically, hit the hardest by the marriage penalty, even though the rich people are subject to the marriage penalty as well (Morrison). Importantly, if people are concerned about reducing poverty and helping low-income people and encouraging family stability, they should be concerned about the tax code. Discouraging work by taxing income and stability by a gap between who is taxed depending on if you’re married and have fairly similar or very similar annual incomes and how many dependents you have is a burden that will not help low-income families out of poverty. The solution, not to poverty, but to alleviate the tax burden, is to allow families the choice of filing taxes as single or married – without penalties – tax status should remain neutral regarding marital status. This allows the opportunity for more people to flourish and from there, allow their children to flourish (Fichtner and Feldman).




Fichtner, Jason and Jacob Feldman. "Eliminate the Marriage Tax Penalty." US News 18 September 2012: 1. web. 4 March 2015.
Kasprak, Nick. "Marriage Penalties and Bonuses (Families with Children Edition)." Tax Foundation 29 August 2013: 1. web. 4 March 2015.
Morrison, Richard. "Tax Code's Marriage Penalty Varies Greatly with Income." Tax Foundation 10 January 2013: 1. web. 4 March 2015.
Ponnuru, Ramesh. "Obama's War on Homemakers." American Enterprise Institute 22 January 2015: 1. web. 3 March 2015.

Why Should We Not Want Welfare?

Most people would probably ask what is wrong with welfare. We've had it a long time ever since the 30's. Why not? It helps people.

Actually, in the long run, if you look closer, welfare does not help people. It actually hurts them.

First, welfare is an incentive not to work. This incentive increases every time the government increases the recipients' checks. This is just common sense: like if your grandmother gave you $5,000 this month and then increased the check to you next month to $5,500, you probably wouldn't want to work very much, and eventually not at all if the increases kept coming. The point is, the incentive to work fluctuates negatively as welfare increases. The incentives just keep piling up not to work as is evident by the truth that what many middle-class people earn today is less than what some people who have welfare receive. The result is that work is discouraged and relying on others is encouraged.

Flickr image by Internet Archive Book Images.

Since work is discouraged, productivity also falls. This argument is made clear by Richard Fulmer in his article in The Freeman: "As benefits and benefit recipients multiply, and as the number of taxpayers declines, the latter will be less and less able to bear the ever-growing burden. Many of the most productive and adaptable will move to countries that allow them to keep more of their earnings ... While productivity increases can help offset falling production due to a declining workforce, any such increase requires either capital investments or innovative process improvements. As previously explained, however, welfare states discourage capital formation by discouraging savings. Innovation is similarly discouraged by taxes that reduce or eliminate any profits that such innovation might generate." 

It is ironic that in a country such as the United States, that we should continue to support the idea of welfare when unemployment is such a hot topic and is at the top of the list of objectives to control by the government, as well as the constant cry of inequality among classes.

Not only does welfare hurt people, but it doesn't help the economy either. In his article "Paying the Unemployed Does Not Stimulate the Economy," in The Freeman, James C. W. Ahiakpor makes a valid argument: "Many in Congress as well as the President and some of his economic advisers have argued that extending the period for paying the unemployed will stimulate the U.S. economy out of its sluggish performance. Would any of them consider as valid an argument that giving money out of their own pockets to an unemployed member of their household would promote the financial prosperity of that household? Would they not correctly see such financial contribution as merely a transfer within the household? Would they also not be eager to nudge the unemployed to get up quickly and find a job? ... So why don’t they apply the same logic to the economy as a whole? The only tenable answer is that they are under the spell of the economic miseducation inflicted on the minds of economists and many among the general population by John Maynard Keynes. They believe that consumer spending drives the economy, without having stopped to consider from where consumers get the means to spend."

Welfare itself stems from a good intention, but it does not bring good outcomes in the end. Welfare means dependence, falling productivity, and as Bono of U2 aptly stated, "a Band-aid. Free enterprise is the cure." In other words, free enterprise brings more opportunity and a higher standard of living than any government can promise or give.

Just Plain Stupid

An increase in the minimum wage is a topic I am really passionate about because I am not for it -- it is appallingly shallow-minded. I believe I will just come right out and say the word that I really am thinking of: just plain stupid.

Go ahead politicians, raise the minimum wage. Distribute the wealth. Inequality is so not fair. The middle class is disappearing and we need to fix this massive problem by adding more government programs. Those are common phrases about a topic that is constantly appearing in headlines everywhere and a topic that many people are concerned about.

Before anyone makes the claim that I am oblivious, unconcerned, and uncaring because the poverty in our world today needs to be addressed... let me clarify why I believe that the increase in the minimum wage is a stupid idea.

When you force employers to pay employees more when they can't afford it, do you think they will hire more or fewer people? Do you think that they can afford to charge low prices? Do you think that they will increase the quality of their products? Do you think that employers will hire low-skilled workers like young people fresh out of high school who need the job experience and the money, ahead of older and more experienced college grads or seasoned highly skilled employees? What are the answers to these questions? 

There will be more unemployment, especially among low-skilled (probably low-income) people, there will be higher prices on the majority of goods and services, and the quality of certain products and services will go down. The employers will cut back because they want to still make a profit to keep the business afloat. Min wage is already making living harder for everyone, what do you think an increase will do?

The lower-income people will be hurt worse than everyone else, ironically –those are the very people that the minimum wage was designed to help. With the decrease in the possibility of getting a job when you really need it, an increase in prices, fewer choices of products and decreases in quality– poverty will increase. 

What needs to happen to decrease poverty and increase the standard of living for all Americans, is the demise of the minimum wage itself. Employers then can decide when they want to pay their employees more, and for what reasons. 

When an employer is doing extremely well due to the high demand for their product(s)/service(s), and the work environment is great due to good employees, then that employer will more than likely be able to afford to pay their employees more, possibly hire more workers, and increase the quality of their products, but at the same time always look for news ways of technology to incorporate into the business – lowering costs. The freedom of the employer will increase the standard of living for not just the people working for the company, but for everyone due to the increased quality of products and moderate to low costs. Of course, what I mean by low costs is the lowest cost possible, considering ever-rising inflation (which acts as a tax on all goods and services.)

However, when an employer is forced to pay their employees more, when those employees may or may not have been worth the raise (what I mean is not ultimately the worth of the employees themselves, but rather the relationship between their work and how much profit the company is making). If an employer cannot afford to pay more for their employees, then not only is the company worse off, but so are consumers. Higher costs of products all across the board mean that low-income people will not be able to afford certain products they once were able to afford, in addition to the cut-backs on quality that will make them worse off than before the wage hike.

Like many instances, government meddling decreases the standard of living for us all, but particularly the poor in this case. Let employers decide what they want to pay their employees. Competition in the free market for employees will increase the wage by itself, without a minimum price for employees. 

Mankiw raises an excellent question about an increase in the Min Wage

http://www.forbes.com/sites/timworstall/2013/02/13/horrible-arguments-in-favour-of-a-minimum-wage-rise/

Middle Class is Not Disappearing

http://econlog.econlib.org/archives/2014/05/the_middle_clas.html

Income Equality is not Feasible

A common cause fought for in today's world is equality. Politicians everyday seem to take a stand for the poor of America, and commonly state that the middle class has declined in our country.

But is this really true that the middle class has declined, and that income inequality should be a real issue that we must amend?

What has really happened is that more Americans are making more money and so there has been in increase in the number of Americans in the top income percentiles. The income for everyone else, also has seen increases as well with time. 

And according to the Census Bureau, in 2012, the percentage of households with no earners ranges from 61% in the lowest fifth income quintile to 3% in the highest fifth income quintile. This means that the number of people in households directly affects the amount of income earned. Also, in this same study, it has been proven that the marital status, age, work status, and education impacts the amount of income people earn. Some of the main causes for inequality of income in America have to do with not staying in school, not getting married, families not staying together, and work status. 

Also, inequality, under a free market, is only natural. People have the freedom to choose where they want to work and what opportunities they would like to take advantage of. 

There is no way possible that our federal government could survive by giving everyone the same income. If you just look around you today, at the US economy in action, you can tell that people are being more careful with their money than they were before the recession. This is due to the increased taxes, and inflation, along with other factors of the recession. 

The downfall of Social Security, in addition, will be because too many people in the coming years will be older Americans looking for pension. But the system cannot afford it. With the rise of the older population, this also means fewer of the younger population, who is the working population that pays for the social security payments made today to retirees. For these reasons and others, distributing the wealth can only cause the downfall of our economy.