A HISTORICAL ANALYSIS OF THE “MARRIAGE TAX PENALTY”

Abstract

The marriage tax penalty resurfaces as a topic of interest when tax policy makers consider the economic consequences of increasing marginal tax rates on declining “family values”. Aim and Whittington [1993] found that marriage taxes influence the incidence of marriage. A historical perspective of the marriage tax penalty and its counterpart, the marriage tax bonus or “subsidy”, merit consideration and re-evaluation in light of current tax policy trends toward higher marginal tax rates. This paper develops a historical framework for the study of the federal income tax and conducts a detailed analysis of the marriage tax for first quartile, weighted average, and third quartile taxpayers over the entire history of the United States personal income tax. It demonstrates that potential bonuses have historically been consistently more significant than penalties. In fact, penalties do not gain prominence until 1964. The current trend toward increasing marginal rates will increase both the penalty and the bonus. Therefore, analysts interested in this area of policy should consider means of reducing both. The most successful method of mitigating the marriage penalty has been the “two-earner deduction”.