I thank the readers who participated in the marriage penalty or bonus poll. The results are in. Among the responses, 43% receive a marriage bonus. 57% receive a marriage penalty.
This split is somewhat a surprise to me. I thought more would have a marriage penalty. You definitely hear more about the marriage penalty, rarely about the marriage bonus. I guess it’s because people complain about the penalty but they gladly accept the bonus.
You receive a marriage bonus when the two of you have more uneven incomes. The person with a higher income gets to use the low tax brackets from the person with a lower income. A one-earner married couple by definition receive a marriage bonus.
The flip side of a marriage bonus is the singles’ penalty. If two people with uneven incomes don’t marry, they pay higher taxes. Some same-sex couples who weren’t allowed to marry suffered from this penalty for a long time.
On the other hand, you receive a marriage penalty when the two of you have relatively even incomes. Above 15%, the tax brackets for married filing jointly aren’t twice as wide as the brackets for singles. The higher your income, the higher your marriage penalty.
The flip side of the marriage penalty is the singles’ bonus. If two people with relatively even incomes live together but don’t marry, they pay lower taxes. Some same-sex couples who used to enjoy the singles’ bonus will pay the marriage penalty now after their marriage is legally recognized.
Size of Marriage Bonus or Penalty
My wife sometimes asks me if I knew how much we would pay in marriage penalty whether we would still marry. I always say yes. The table below shows the size of the marriage bonus or penalty among the poll responses:
|Marriage Bonus||Marriage Penalty|
Nobody reported zero. Every respondent receives at least $500 in marriage bonus or at least $1,000 in marriage penalty.
Marriage bonus starts low, stays in a narrower range, and is more evenly spread out, as witnessed by its average and its median being close to each other. Marriage penalty is more concentrated at the lower end (lower median) but it goes out much farther. The larger penalties at the far end pull up the average.
Think about the couple who pay $20,000 more in taxes each year just because they are married. It takes a super-strong bond to say this is the price we pay for love. How much is $20,000 per year invested throughout their careers? Easily over $1 million.
To be honest I think it’s a pretty stupid system that makes you pay more or less in taxes just because the two of you are married or not married.
[Photo credit: Flickr user cupritte]