by NATHAN INKS
Since 1969 “fairness” in American federal income tax policy has been based on the goal of achieving a trifecta of three conditions: (1) a progressive tax system, where those with higher income are taxed at a higher rate, (2) “couples equality,” where married couples with the same total income have equal tax burdens, and (3) “marriage neutrality,” where the tax burden on married and unmarried couples with the same total income is the same. Yet it is impossible to satisfy all three of these conditions consistently; the trifecta of tax policy goals in actuality creates a tax trilemma where the vast majority of American married couples receive either a “marriage bonus” or suffer a “marriage penalty” as a result of filing jointly.
Where a couple’s overall tax burden decreases as a result of being married and filing jointly, this a bonus, whereas a penalty occurs where a couple’s tax burden is increased due to being married and filing jointly. In general, couples where one spouse earns a significant majority or all of the income benefit from a marriage bonus, while couples where each spouse makes close to the same amount suffer a marriage penalty. Working class and middle class couples with children where both spouses work suffer the largest marriage penalties.
So how can this inequality be eliminated? The easiest solution would be to abolish the progressive nature of the nation’s tax system—taxing everyone at the same rate; however, such a move would be a major tax policy shift and is unlikely to gather significant support. That leaves two options: commit to ensuring either couples equality or marriage neutrality.
At its heart the federal income tax has always been a tax on individuals; the goal of couples equality is relatively new, and it does not mesh with traditional tax policy or today’s direction of society. For that reason it should be eliminated, and the best way to do so is to eliminate joint filing for married couples.
Prioritization of marriage neutrality makes sense from an historical perspective. From the creation of the income tax in 1861 through 1948, there was no ability to file jointly, and from 1948 through 1969 income was split evenly between spouses; it was not until 1969 that couples equality was prioritized—and the marriage bonus and penalty created.
From a societal standpoint, prioritizing marriage neutrality also makes sense. While couples equality may have been desirable at a time when the vast majority of households earned all or nearly all of their income through one spouse, such is not the case today. Additionally, cohabitation outside of marriage is much more prevalent now than in the past, and regardless of whether this is a desirable trend, from a policy perspective it makes much more sense to tax couples with similar financial situations the same regardless of whether they have a marriage certificate than it does to tax couples with vastly different financial situations the same simply because they have a marriage certificate. Requiring separate tax returns would also protect victims of financial domestic abuse, as abolishing joint filing would remove the necessity for an individual to request innocent spouse relief when his or her spouse incorrectly reported income or claimed a deduction or credit.
Couples equality has been the third wheel of tax policy “fairness” for close to 50 years, and as time goes on it is leading to more and more unfairness in how tax policy is ultimately implemented. For better or worse the U.S. income tax system is one that focuses on the individual, and the option to file jointly should be eliminated.