The (Gay) Marriage Penalty
The Boston Globe , May 22, 2004
The bad news for newlywed Massachusetts gays and lesbians is that, under the 1996 Defense of Marriage Act, the federal government won't recognize their marriages.
Same-sex couples are more likely to have dual incomes than heterosexual married couples. In Massachusetts, both partners work in 66 percent of same-sex couples living together, compared to fewer than 55 percent of married couples, according to 2000 Census data analyzed by M.V. Lee Badgett, a University of Massachusetts at Amherst economist, and the author of "Money, Myths, and Change: The Economic Lives of Lesbians and Gay Men" (Chicago).
In a 2000 article in National Tax Journal, Badgett and two economists known for their work on the tax effects of marriage estimated what would happen to federal income taxes if same-sex marriage were legalized nationally. The result, concluded James Alm, Badgett, and Leslie A. Whittington, would be "an annual increase in federal government income taxes of between $0.3 billion and $1.3 billion, with the likely impact toward the higher range of the estimates." (The article, "Wedding Bell Blues," is available on Alm's Georgia State University homepage.)
Using conservative figures for the number of gays and lesbians, the number living together, and the number likely to wed, they projected that there would be around 550,000 same-sex married couples nationally. Tax estimates depended on assumptions about how many couples have children and how their incomes match up.
Consider the average gay male earner, with $33,717 in 1997 adjusted gross income. Filing as a single taxpayer, he owed $4,335 in federal income tax that year. But if he and another man with the exact same income could marry under federal law, they would owe $10,107 as a married couple -- $1,437 more than they would as singles.
The marriage penalty isn't the explicit anti-marriage policy that some critics make it out to be. (And in fact, many married couples pay less in taxes than they would as singles.) It's the unintended result of having a progressive income-tax system and taxing couples, rather than individual earners.
But in Massachusetts there's good news for newlyweds, gay and straight. The commonwealth has a flat 5.3 percent income rate, and most deductions don't change with marriage.
Badgett estimates that Massachusetts tax bills wouldn't change at all for 43 percent of same-sex couples if they married. Thirteen percent would get a tax cut averaging $223, and 44 percent would pay an average of $118 more. If every same-sex couple in Massachusetts married, state tax revenues would rise by about a half-million dollars a year.
In her calculations, says Badgett, "the couples paying higher taxes as married couples generally had a low earner whose income was not taxed at all as a single person but is when married."
That tax hit is unlikely to deter many marriages, however. Research indicates that main effect is on whether earners work, since it's that second income that usually triggers the penalty, not on whether couples get married in the first place.
In the end, love and commitment trump fiscal calculations. "Marriage is an amazing program, from society's point of view," says Jonathan Rauch, author of Gay Marriage: Why It Is Good for Gays, Good for Straights, and Good for America. "Couples undertake a stupendous obligation to each other and society, and in many cases they pay for the privilege."