Most years, the Tax Policy Center celebrates Valentine Day with a whimsical analysis of the costs and benefits—tax-wise—of marriage. What’s new this year is that we’ve applied a racial lens to our analysis, and, as reported in our new working paper, the findings are no cause for celebration.
On average, Black couples pay more in individual income taxes if they are married and white couples pay less—an annual advantage of $662 for white married couples relative to Black couples.
Magnitude of marriage taxes
Marriage may cause a couple’s tax bill to go down (a marriage bonus) or up (a marriage penalty) relative to if the couple were not married. In some cases, marriage has no impact at all.
We find that 46 percent of Black married couples incurred a marriage penalty under 2018 tax law, compared to 43 percent of white couples. Conversely, Black couples were less likely to receive a bonus than white couples (36 percent to 43 percent).
On net, Black couples paid an average of $148 more in income taxes due to marriage, while white couples got an average bonus worth $514. Just among those with penalties, Black couples paid more as a share of income than white couples (1.8 percent versus 1.4 percent).
Those findings hold even when the incomes of Black and white couples are similar. For example, relative to white couples, Black couples with adjusted gross income between $50,000 and $100,000 were more likely to face marriage penalties (59 percent to 51 percent) and less likely to receive marriage bonuses (33 percent to 44 percent). Black couples in this income group paid, on average, a net penalty of $358. White couples in this income group received, on average, a net bonus of $61.
Reasons for racial disparities
To some extent, racial disparities in the tax consequences of marriage are rooted in differences in Black and white couples’ experiences in the workforce and in their family responsibilities.
Marriage penalties are more prevalent among couples when both spouses work than among one-earner couples. And among two-earner couples, marriage penalties are higher the more similar the spouses’ income. That link between work patterns and marriage penalties occurs because the couple’s combined income pushes them into higher tax rate brackets and into the phaseout ranges of certain deductions or credits.
Our research confirms what some Black legal scholars—most recently, Georgetown University law professor Dorothy Brown—have long pointed out: In Black families, both spouses are more likely to work than is the case with white couples. Moreover, there is greater earnings parity among Black couples: For about 6 in 10 dual-earning Black couples, the ratio of the lower-earner’s income to the higher earner was at least 60 percent; the same was true for only about 45 percent of two-earner white couples.
Kids also contribute to marriage penalties, even as the tax code accounts for some of the additional costs incurred by families with children. About 57 percent of Black married couples in our sample had dependents, but slightly less than half of white couples did.
One reason for the link between marriage penalties and kids is that the earned income tax credit (EITC) begins to phase out for married couples at levels that are less than twice the phaseout thresholds for unmarried parents. Thus, the married couple’s combined income may cost them some or all the EITC, compared to what they would receive filing as unmarried.
Another reason is head-of-household filing status. That status recognizes the burdens placed on single caregivers, but a higher standard deduction and more generous rate brackets compared to other unmarried filers also boosts marriage penalties.
Can racial disparities in marriage penalties be reduced?
There’s no easy solution to the racial disparities in the tax treatment of marriage in a tax code that doesn’t explicitly refer to race. Other options tackle the issue more broadly. Allowing couples to file as unmarried individuals has the potential to eliminate all penalties but would make the tax code less progressive and open new opportunities for tax avoidance. Allowing two-earner couples to deduct a portion of the lower-earner’s income, as was done in the early 1980s, would reduce penalties. But the benefits of that deduction would disproportionately benefit wealthier couples.
Equity comes in different forms
For as long as there has been an income tax, policymakers and the public have been aware that the tax code penalizes some married couples and rewards others. But they have accepted marriage non-neutrality as a cost of a tax system that promotes equity through a progressive rate and by various benefits for differences in a family’s resources (presence of kids, for example).
Differences in marriage penalties and bonuses by race and ethnicity may have persisted this long because of an information gap. As Beverly Moran and William Whitford noted in 1996, it has been difficult without data for policymakers (predominantly white) and tax researchers (predominantly white) to connect the dots between the factors that give rise to marriage penalties and Black families’ lives.
Using new methods to shed light on racial disparities, as we do in our paper, opens the door to a broader consideration of equity in the design of tax policies.
