The Economics of Marriage This was a letter to the editor of the Madison Capital Times. EDITOR: 6/29/94 The UW currently provides health insurance free to the spouses of students but is planning to extend this to "domestic partners" as well. It looks like someone hasn't thought this out very well. Marriage is relatively well defined and easily documented. Unless university officials are prepared to let each student name a friend to receive free medical coverage, they should consider a few things. Medical insurance is a valuable commodity these days, and offering each student an extra freebie could lead to many abuses. Opponents of the idea could encourage every student to register at least one "domestic partner" (friend, landlord, anyone who has the same address). Churches near campus could aid the homeless by arranging 'free' medical coverage for those who would list the address of sympathetic students. Since, unlike marriage, there is no documentation, it would be up to the UW or Physicians Plus to challenge any claims that did not fit their idea of what they had in mind (what ever that may be). Indeed, churches would be remiss in their duty to aid the poor if they passed up this opportunity to help thousands of people. But the real issue is not medical coverage but marriage: should it be rewarded by society? Currently, married couples who both work pay extra federal taxes because they are married. The standard deduction for a married couple filing jointly is $6200, but each single person gets $3700. Thus the couple loses $1200 in deductions as a penalty for being married. The tax tables are the same for single and married up to $22100 of taxable income. For higher incomes the tax table value is less for the married- but the tax is one their COMBINED INCOME. This will often put them in a higher bracket than either would be if taxed as single. If you want to see this, each married couple re-figure your 1993 taxes as if you were single "domestic partners" and each single person re-figure as if you were married to someone who made the same salary as yourself. In addition, the married cannot dissolve their relationship without lawyers and extra costs. Wisconsin is a communal property state, and almost any divorce requires lawyers to help split up the couples assets (and take a share of them). What do the married get in exchange for this extra burden? It used to include benefits like employee health coverage and "family membership" rates. Society at one time even encouraged marriage with tax advantages (back in the days when 95% of children were born to married couples!) But recently the pressure has been to eliminate any benefit for being married. In the name of "fairness", the married should pay extra but receive nothing extra in return. And realistically, it is unlikely in the current political climate that taxes on the married will be reduced to no more than if they were two single domestic partners- this would be denounced by "progressives" as a giveaway to the rich (since married couples are less likely to live in poverty than single people). In a lengthy ISTHMUS interview with Wisconsin Representative Tammy Baldwin, she indicated that she would push for extension of all married benefits to unmarried couples- especially same sex couples. But she would not attempt to extend marriage to same sex couples. The "New Progressive Party" in Wisconsin is also planning to promote domestic partner benefits. This is the correct strategy for those who want the benefits of marriage but are not interested in paying the price or making the commitment. It seems like a strange time to mount a campaign to discourage people from getting married. Studies of the children raised by single parents are now becoming available; they constitute 85% of juveniles in trouble with the law, and most of the students having academic problems. The majority of adults in prison for violent crimes were raised without fathers. It may be that most of the problems superficially viewed as being due to poverty or gangs or crime or drugs are really consequences of the breakdown of marriage. Even the much publicized recent Wisconsin Policy Research Institute study claiming that African-American students do poorly in Madison schools could be a misinterpretation. Where is the data on how African-American students from stable two parent families do in school compared to white children living with a single mother? This is clearly necessary, if we really want to know whether it is African-American students or single-parent students who are not doing well in school. But by the same logic, proponents of "conventional morality" should consider supporting same sex marriage. It seems that the "conventional family value" lobby is not powerful enough to keep congress from imposing this tax penalty on marriage, but if same sex marriage were available, perhaps the (even more?) powerful homosexual lobby might join to help give the married an even break. Conservatives who would not be inclined to support a same-sex marriage law should view it as a revenue enhancement measure. Dare I call it a "SIN TAX"? Same sex-marriage would remove any rational basis for "domestic partner" benefits. It would be interesting to see how many homosexual couples (especially men), would be willing to pay the price that heterosexual couples do in order to get the benefits of marriage. James E. Blair PS Shortly after this letter was published, the UW and the HMO Physicians Plus annoumced that they were cancelling plans to cover domestic partners. They decided it might be much more expensive than they had projected. ,,,,,,, ____________________ooo__(_O O_)__ooo_________________________ (_) Jim Blair (jeblair@facstaff.wisc.edu) University of Wisconsin, Madison UPDATE: After I posted this, someone pointed out that where only one partner in a marriage works, there is a tax reduction for being married. But when both work and have similar incomes, there is a penality. Chicago Tribune columnist Joan Beck, in her Sunday October 19,1997 column claims that last year the marriage tax hit more than 21 million married couples, with an average of $1400 in extra taxes compared to what they would have paid if living together out of wedlock. The 1997 income tax changes have made the situation even worse, with its various ceilings. For example, the new capital gains rate is 10% up to a ceiling of $24,650 for singles but $41,200 for married couples. So a married couple will lose if each has less than $24,650 of income, but their combined income is greater than $41,200. Two recent college graduates with middle income jobs will lose the tax deduction on the interest paid on their student loans if they marry each other. Their combined income will become "too high". Some supporters of the current marriage penality claim that it came about in response to cries from single taxpayers that THEY were being penalized for NOT being married. The claim is that there is no way to have a tax code that is fair to both married and single. But an obvious start would be to simply allow a married couple to file either as two singles, or to file a joint return, which ever they prefer. AND: Ted Compton wrote: > The phenomenon of women entering the workplace in large numbers is one > (but only one) of the factors contributing to the presently growing gap > between rich and poor. Hi, Yes, this is certainly a major factor in the widening gap between rich and poor in terms of family or household incomes. The wives of high income men are more likely to work, and to have higher income jobs, than the wives of low income men. The current policy to "correct" this "problem" is the marriage penality in the income tax. But of course the result (as in some European countries) will be a reduction in the number of couples who marry. In Sweden for example, about half of the couples who live together and have childred are not married. Their taxes are much lower that way. Ted Compton wrote: > Well, maybe. Maybe "of course." Even so, it's not clear to me taxes by > themselves are what cause results like this. Attitudes about marriage > change; attitudes about divorce; attitudes about single parenting. And > some of the tax differential is caused by "bracket creep," is it not? > It seems by no means a simple relationship. Hi, Well people act because of many motives, and give many reasons for their actions. But I am never suprised when they act to increase their wealth or in their economic interests: even if they give OTHER reasons for their actions. As in, "well sure this saved me money, (or made me a fortune) but that was not why I did it". (Well of course that was not WHY you did it ;-) > > In the early 60s things were the other way around. Single people paid more > in taxes, married people less (due to the joint return). I don't remember > people getting married to reduce their tax bills. I was a young graduate student in the early 1960's and people of my age were very much aware of the tax advantage of being married. The common saying was "two can live a cheaply as 1.4". I don't doubt that this was a consideration in some marriages. > And - I don't know - when did this "marriage penalty" come into being? > Hasn't it been around for a while? I don't know exactly when the tax advantage reversed, but during the latter years of the Reagan era, when the top rate was 28%, whatever the penality for high income couples, if each was already in the top bracket, the combined income was still only in the same 28% bracket. The marriage penality for the two high earners became severe when the top bracket was raised above 28% to its current 39%. Since then people who would be taxed at 28% on their last dollar if single can now be taxed at 39% because they are married, since the bracket is determined by the combined incomes. >Shouldn't it have already caused a drop > in the marriage rate? Has it? (Or are married people just slow to catch > on?) People are sometimes slow to respomd, often it requires a new generation to change habits. But any demographers out there: Has there been a decline in the marriage rate, especially with high income earners? > (I do remember for a little while there was a fad for elderly people > getting divorced to save on taxes, but it doesn't seem to have become > widespread. What about elderly couples in Europe?) I think it is common knowledge that many elderly couples that live together (widows especially) don't get married because of the Social Security laws. -- ,,,,,,, _______________ooo___(_O O_)___ooo_______________ (_) jim blair (jeblair@facstaff.wisc.edu) For a good time call http://www.geocities.com/capitolhill/4834 AND from Feb 2000, this: Ray wrote: > My wife was appalled when we did our taxes this year. She went back to > work after the last kid left home. The distribution of her salary went: > 28% federal tax (since hers was the marginal income, it faced the > marginal rate)...... > She stared at these figures a long time, then said, "Why am I working?" Hi, The obvious solution to your situation is to get divorced. Figure what your taxes would be if you did. I mean don't move or change the way you live, just be divorced. The IRS/Congress/Feds say that they 'can't afford' to not penalize people for being married. (if you can follow that logic). So do what they seem to want people to do: get divorced, or better, not get married in the first place. I mean we want to make Uncle Sam happy ;-) ,,,,,,, _______________ooo___(_O O_)___ooo_______________ (_) jim blair (jeblair@facstaff.wisc.edu) Madison Wisconsin USA. This message was brought to you using biodegradable binary bits, and 100% recycled bandwidth. For a good time call: http://www.geocities.com/capitolhill/4834 AND: I used my 2002 IRS Form 1040 to calculate the marriage penalty: the extra US income tax paid by a couple who are married over what they would pay if they were single and living together. This is for people under 65 who take the standard deduction and have no non-taxable income and no IRA deductions. If each person earns $40,000 per year. single married income 40000 80000 std det 4700 7850 line40 3000 6000 taxable 32300 66150 tax 5074 11663 couple 10148 1515 =penalty I found the penalty to be the same if their incomes are $50,000, but is only $228 for incomes of $30,000. In the "same sex marriage" debate it is claimed to be unfair to deny the benefits of marriage to same sex couples, and the trend has been to provide them the benefits (domestic partners, etc.) without the marriage. But those benefits come at a cost. I say Conservatives are shooting themselves in the foot by blocking same sex marriage while the benefits of marriage are being extended to same sex and unmarried couples.