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The Widespread Prevalence of Marriage Penalties

Testimony Before the Subcommittee on the District of Columbia, Committee on Appropriations, United States Senate

C. Eugene Steuerle

Published: May 03, 2006
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The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

C. Eugene Steuerle is a senior fellow at the Urban Institute, co-director of the Tax Policy Center, and a columnist for Tax Notes Magazine. Significant portions of this testimony are taken from work with Adam Carasso on "The Hefty Tax on Marriage Facing Many Households with Children" in The Future of Children 15 (2), 2005 (attached). Any opinions expressed herein are solely the author's and should not be attributed to any of the organizations with which he is associated.

Note: This testimony is available in its entirety in the Portable Document Format (PDF).

The text below is a portion of the complete document.

Thank you for the opportunity to testify today on marriage penalties and bonuses in government programs. Today, literally hundreds of billions of dollars in government taxes and social welfare benefits are at stake for tens of millions of couples depending on whether they are married. While my primary focus today will be on tax and social welfare programs for low- to moderate-income households with working parents and children, penalties and subsidies are also writ large in other programs such as educational grants and Social Security and affect most Americans at different points in their lives.

How the Penalties and Subsidies Work

Citizens pay an overall marriage penalty when their combined social welfare benefits less taxes are lower when they are a married couple than when they are two single individuals. Because marriage is optional, marriage penalties or subsidies are assessed primarily for taking wedding vows, not for living together with other adults (although there are some exceptions).1

How much tax and transfer program penalties and bonuses are worth and the rate at which their value falls as family income rises varies by state, by family size, by the age of the children, by additional factors like the cost of rent and child care, and by what other transfer programs the family may be enrolled in.

  • Example 1: An EITC penalty. A single parent with two children who earns $15,000 enjoys an EITC benefit of about $4,100. The credit decreases 21.06 cents for every dollar a married couple earns above $15,040. Based on that phaseout rate, if the single parent marries someone earning $10,000, for a combined income of $25,000, their EITC benefit will drop to about $2,200. They face an EITC marriage tax penalty of $4,100 minus $2,200, or $1,900.
  • Example 2: A Medicaid penalty. A mother of two children in Pennsylvania in 2004 who earns $20,000 qualifies for Medicaid (with an insurance value estimated at $3,424). If she marries someone making just $6,000, resulting in a combined income of $26,000, her children lose their Medicaid. Unlike tax programs like the child credit and EITC, which contain marriage subsidies for some couples, most transfer programs for low-income families with children contain mainly marriage penalties—the additional income introduced by a spouse generally reduces or even cuts off benefits received before the marriage.
  • Example 3: An EITC bonus. A nonworking mother with two children in Pennsylvania on TANF marries someone without children who earns $5,000. Their marriage bonus derives mainly from an increase in EITC of about $2,000 and no loss of TANF or Medicaid benefits.

Notes from this section

1 By law, some transfer programs would treat a couple that admits to cohabiting (for an appreciable period of time) just as they treat a couple that marries. In practice, however, administrators seldom go knocking on doors to check on cohabitation, often cannot find proof of round-the-clock cohabitation, as opposed to several days or nights a week, and are unlikely to require joint filing unless the couple has been together a long time. In the few cases where officials do determine that a couple is cohabiting, many of the same issues arise anyway: what we describe as "marriage penalties" then become "marriage and admitted cohabitation penalties."

Note: This testimony is available in its entirety in the Portable Document Format (PDF).