Working Paper: NBER ID: w2231
Authors: Harvey S. Rosen
Abstract: The public debate surrounding the Tax Reform Act of 1986 has paid little attention to the tax consequences of being married. Specifically, there has been virtually no discussion of the possible existence of an implicit "marriage tax"--the increase in the joint income tax liability of a man and woman when they marry. This lack of concern appears to be due to the perception that the new law has lowered marginal tax rates to such an extent that the magnitudes of marriage taxes (and subsidies) are inconsequential. In this paper, I show that to the contrary, the new law created large taxes on being married for some couples, and large subsidies for others. On the basis of a tax simulation model, I estimate that in 1988, 40 percent of all couples will pay an annual average marriage tax of about $1100, and 53 percent will receive an average subsidy of about $600. One striking result that emerges from the analysis is the relatively large marriage tax that will be borne by some low income couples with children. For such couples, the marriage tax can amount to 10 percent of joint gross income. Hence, the new tax law appears to quite "anti-family" for some low income workers.
Keywords: marriage tax; tax reform; tax consequences of marriage
JEL Codes: H24; H31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Tax Reform Act of 1986 (H20) | marriage taxes (H24) |
| Tax Reform Act of 1986 (H20) | marriage subsidies (J12) |
| marital status (J12) | tax liabilities (H26) |
| marriage tax (H31) | joint income tax liability (H24) |
| marriage tax (H31) | impact on low-income couples with children (J12) |
| income levels (J31) | magnitude of marriage taxes (H31) |
| income levels (J31) | magnitude of marriage subsidies (J12) |