REDISTRIBUTION, WELFARE AND EQUITY EFFECTS OF MARRIAGE TAX PENALTIES IN THE UNITED STATES

The Internal Revenue Code of the U.S. as well as income tax statutes in a number of states contain provisions that penalize some married couples by virtue of their marital status. These families have greater tax liabilities than would apply if the husband and wife divorced. At the same time, other married couples benefit from reduced taxes made possible by the income splitting provisions of the laws. Thus, some families receive tax benefits and others are penalized as a consequence of the choice to be married. There is now much discussion in Washington and state capitals of reducing and possibly eliminating the so-called “marriage tax”. Most proposals for reform retain the income splitting provision of the tax code; thereby avoiding direct harm to families currently receiving tax benefits from marriage. This is the approach adopted in this paper.