For Better and Worse: The Differing Income Tax Treatments of Marriage at Different Income Levels

Although both marriage penalties and marriage bonuses exist at all income levels under the federal income tax, the system is tilted toward penalties for lower-income couples, toward bonuses for middle-income couples, and back toward penalties for upper income couples. This Article begins by explaining how the tax rules produce these differing treatments of marriage at different points in the income distribution. It then argues that the increase in recent decades in the social acceptability and prevalence of cohabitation makes tax marriage effects a more serious concern--in terms of both behavioral, effects and fairness-than in earlier decades. After demonstrating that Congress has never offered any justification for the differing tax treatments of marriage at different income levels, and that no plausible defense exists for the current distribution of penalties and bonuses, the Article offers several policy recommendations. The most basic and most important recommendation is simply that, whatever Congress does in this area, it should make conscious decisions about the appropriate distributions of penalties and bonuses at various income levels, instead of following its current practice of stumbling into a set of poorly understood and almost-impossible-to-defend effects