A Bid to Make Tax Policy Friendlier to Marriage

Sharon Mallory and her boyfriend, Darryl Pierce, are ready to get married. Both work at Ford Electronics in Connersville, Ind., each earning less than $10 an hour, plus occasional overtime.

But when they consulted an accountant, the couple learned that getting married would cost them.

"If we got married, not only would I forfeit my $900 [tax] refund check, we would be writing a check to the [Internal Revenue Service] for $2,800," Ms. Mallory writes in a letter to Rep. David McIntosh (R) of Indiana. "Darryl and I would very much like to be married, and I must say it broke our hearts when we found out we can't afford it."

Mallory and Mr. Pierce ran into what tax experts call the "marriage penalty" - they would pay more in income taxes because they are married than they would if they were single.

A growing number of married couples are in a similar position, according to a recent study by the nonpartisan Congressional Budget Office. As a result, some argue, official US tax policy undermines marriage, providing financial reasons for couples simply to live together, as Mallory and Pierce continue to do.

Among the reasons for a jump in the number of couples paying the marriage penalty: The rise of the dual-income household, and greater equality between spouses' salaries. "The greater equality of spouses' earnings increased both the share of couples incurring marriage penalties and the size of those penalties," the CBO says.

NOW, Representative McIntosh and Rep. Jerry Weller (R) of Illinois are introducing a bill to allow married couples to file tax returns as individuals, rather than jointly, if that benefits them more.

"The marriage tax is not only unfair. It's wrong. It's immoral," Representative Weller says.

Rep. Barbara Kennelly (D) of Connecticut has been working for several years to redress the problem. "The deeper you go into it, the more difficult you find it is to resolve," she says. "We asked for the [CBO] report because we finally decided it was time to collect the facts so that we knew what we were talking about."

CBO says 42 percent of couples paid marriage penalties averaging $1,400 last year.

Most of the rest, however, reaped tax benefits averaging $1,300, called a "marriage bonus."

Take the case of a couple in which one spouse earns $75,000 a year, while the other has no income. They pay $3,872 less in income taxes than they would if they were single. But a husband and wife who each make $37,500 a year pay $1,391 more in taxes simply because they are married. (Both couples, however, pay the same amount of total income tax to the federal Treasury.)

"Is [the marriage tax] the No. 1 problem with the tax code? No, probably not," says Dan Mitchell of the Heritage Foundation, a conservative think tank here. "But is there something fundamentally wrong with a tax code that discriminates? Definitely, yes. Government should not discriminate, period."

The federal government did not set out to penalize marriage. William Gale of the centrist Brookings Institution, another Washington think tank, says the marriage penalty results from the tension between three incompatible goals: that the wealthier pay more tax; that married couples with the same income pay the same amount of tax, regardless of who earns the income; and that the tax be marriage-neutral.

The current system meets the first two goals. "If you're willing to give up on one of those other two things, then you can reduce the marriage penalty," Mr. Gale says.

Reducing the marriage penalty will also cost the federal Treasury, raising concerns among deficit hawks. Indeed, allowing couples a choice in filing would have cost $29 billion in revenue in 1996.

The proposed Marriage Tax Elimination Act has 41 sponsors, all from the GOP sophomore class. It has also been endorsed by several conservative groups, including the Christian Coalition, the National Taxpayers Union, and Americans for Tax Reform.

Representative Kennelly, however, urges caution. "We're going to look at all the possibilities.... We've got more work to do."