Law Review Article on Taxes: Uncoupled Singles Always Pay a Penalty
More evidence for the singles tax penalty
Posted Apr 14, 2010
When I wrote the first draft of Singled Out, one of the sections I was most uncertain about was on taxes. Could it really be true, as I was discovering by running through all the calculations, that a single person (not living as part of a couple) ALWAYS paid more in income taxes on the exact same taxable income as a married couple filing jointly? As I explained on pages 225-227 of the book, and in this post, that's what I found, no matter what taxable income I entered into my calculations.
I asked other people with more knowledge of tax law than I had (which was none) to look at that section and see if it seemed okay before the book went to press. When they and I were satisfied, off it went.
That was hardly the end of it. When I make the point about the pervasive singles penalty at talks, I get a cacophony of criticism. And check out all the nasty attacks (along with the more dispassionate and thoughtful comments) posted in response to my essay from last year titled, "Marriage Penalty? I Don't Think So."
Happily, there is now a person of great expertise who has analyzed the tax implications of marital and coupled status, and published her findings in a law review article. The author, Lily Kahng, served "three years as attorney advisor in the Office of Tax Legislative Counsel in the U. S. Department of the Treasury." Her law review article about "the single taxpayer in a joint return world" can be downloaded for free.
Here is her most important conclusion:
"There is never a single person's bonus - that is, a single person never pays less relative to a couple, whether married or unmarried, with the same amount of income as the single person (p. 660)."
Of course, that's not what we hear in the public conversation. Instead, the fight over the so-called marriage penalty is about the differences in taxation between an unmarried couple and a married couple. Quoting Kahng again:
"In recent years, the debate regarding the joint return has not questioned the primacy of the couple as taxpayer, focusing rather on whether and to what extent couples should suffer marriage penalties or enjoy marriage bonuses, and who among the universe of couples ought to be eligible for the marriage bonus. The treatment of single individuals has received almost no attention (p. 663)."
Kahng distinguishes between an "unmarried couple's penalty or bonus" and a "single person's penalty." An unmarried couple can, under certain circumstances, end up paying more in taxes if they marry - that's what we usually think of as the marriage penalty. But they can also pay less. A single person (not part of a couple) never pays less on the same income as a couple.
The most common rationalization for single people paying more is that the single person is just one person and the couple is two people, so the same amount of money should go further for the single person than for the couple. Kahng explains that this is not necessarily so. For example, single people who live alone pay for their rent or mortgage, utilities, and all the rest on one income, whereas the couple pays one set of expenses from (potentially) two incomes.
Also, Kahng suggests, there are ways in which a couple actually gets more for their income than a single person does. If, for example, one member of the couple works while the other stays home (and no, it doesn't have to be a woman who stays home), that person can do all the housework, cooking, errands, and so forth that a single person would not have time to do while working.
There are even more radical ways to think about the tax issues. Based on her reading of the literature and her own analyses, Kahng suggests two of them. I'm not necessarily endorsing them (and I don't think she is either) but they show how our thinking can be broadened when we do not simply assume that of course married couples should pay less. Remember that the topic in all of these discussions is marital status and not parental status - kids and taxes add up to a whole other issue.
Kahng's two radical ways of thinking about marital status and taxes:
1. "An individual's decision to marry, if it entails the support of another person [she is referring to a spouse here, not a child] is a personal choice, just as is the decision to go on an expensive vacation every year, and that consumption ought to be taxed." (Read more on p. 679-680.)
2. A single man, for example, "is paid less for his work because he is single. He is charged a premium for many consumer goods and services. He is stigmatized and ostracized, and subjected to a variety of negative attitudes and stereotypes...[therefore he] should not have to suffer the added insult of paying a tax penalty."
So what is Kahng's bottom line? Same as mine. Abolish the joint tax return. Each individual files his or her own tax return. That would not be so unusual. Quoting Kahng one last time, "The United States is one of the few developed countries to retain the joint income tax return, available for heterosexual married couples only."