Taxes: The Marriage Penalty Is Real to Me
I spent most of yesterday in the yearly ritual known as “doing taxes”. After I filed , I decided to explore some scenarios given my own tax situation. Much to my surprise I found that the Marriage Penalty is alive and kicking; Married people in my situation pay an extra $2,200 to the feds being married as opposed to being single. This surprised me since I had believed that the Marriage Penalty was a myth – especially for couples like ours with disparate incomes.
I learned this by doing complete returns in the software: married filing jointly and single plus head of household. Under the married filed jointly it appears that our combined incomes pushed us into a higher tax bracket where we got hit harder by progressive taxation. Under the single/head of household scenario the one with the lowest income filed as single and took the standard deduction, while the other with the greater income claimed the Kid and itemized deductions. The net difference between the two scenarios was $2,200. I even checked the tax tables online just to be sure.
I’m not keen on social engineering using public policy, but I suspect that social engineering is less an issue than increased tax revenue. If the IRS was losing money from a loophole I have no doubt they’d close it.
ligneus:
There is probably unintended social engineering happening as people decide not to marry in order to pay less tax. I don’t know a lot about it but it seems to me that the flat tax would eliminate a lot of this kind of idiocy and the money saved on accountants, legal and administrative costs and just eliminating what must by now be a small city to contain all the archives would allow a huge tax reduction, like reversing the snowball that has been merrily rolling along for so many decades now.
13 April 2008, 2:24 pmScott Kirwin:
Ligneus
13 April 2008, 3:15 pmThe last time I considered a flat-tax (Forbes’s plan) I would have ended up paying more under it than the current system.
However I like the idea in theory – especially if it guts the taxpaying industry like a trout.