Women, Taxes, and Social Security
Chapter 13
Income Taxes Marriage Tax Marriage Subsidy Income Taxes
Marginal Tax Rate Progressive Tax
Tax Schedules Similar to Those That Prevailed from 1948 to 1969
Table 13.1, p. 493
Single Tax Rate Schedule Married Tax Rate Schedule
Income Marginal Tax Rate
Income Marginal Tax Rate
$0-10,000 0% $0-20,000 0%
$10,001-30,000 15% $20,001-60,000 15%
$30,001-60,000 30% $60,001-120,000
30%
$60,001 and up 40% $120,001 and up
40%
TAX REFORM ACT OF 1969 Introduced to correct the disparity
in favor of married individuals At this time, women were not
active participants in labor market New tax introduced to reduce
marriage subsidy but as women entered into the labor market it introduced Marriage penalty
Simplified Version of 2002 Income Tax TableTable 13.2 , p 494
Single Rate Schedule Married Rate Schedule
Taxable Income Marginal Tax Rate
Taxable Income Marginal Tax Rate
Up to $6,000 10% Up to $12,000 10%
$6,001-27,950 15% $12,001-46,700 15%
$27,951-67,700 27% $46,701-112,850 27%
$67,701-141,250 30% $112,851-171,950
30%
$141,251-307,050
35% $171,951-307,050
35%
$307,051 and up 38.6% $307,051 and up 38.6%
Marriage Penalty Household with only husband
working earning $80,000 Tax would be 10% of first 12,000 or
$1,200 plus 15% of 12,001 to 46,700 or
$5,204.85 plus 27% of 46,701 to 80,000 or
$8,990.73 or a total of $15,395.58 or $15,396
Marriage Penalty Household with both spouses working
each earning $40,000 or a combined income of $80,000 Tax would be 10% of first 12,000 or $1,200 plus 15% of 12,001 to 46,700 or $5,204.85 plus 27% of 46,701 to 80,000 or $8,990.73 or a total of $15,395.58 or $15,396 just as in the previous household
Marriage Penalty However, if these individuals were not
married their individual tax liability would be: 10% of first 6,000 or $600 plus 15% of 6,001 to 27,950 or $3,292.35 plus 27% of 27,951 to 40,000 or $3253.23 for a total of $7145.58 or combined of $14,291.16 or $1,104.84 less in taxes
Marriage Penalty Furthermore, if they were to file married
but each income was considered separately their tax liability would be 10% on first 12,000 or $1,200 and 15% on remainder or $4,199.85 for a total each of $5,399.85 or $5,400.00 for a combined tax liability of $10,800 which
is $4,596.00 less than their current tax liability
Marriage Tax Penalty and Marriage Tax Subsidy
Note that AGI is Adjusted Gross Income
Income before itemizing or taking standard deduction
This table is based on 1998 tax liability
Marriage Penalties and Subsidies for Hypothetical Couples, 1998
Table 13.2, p. 495
AGI of One Spouse
AGI of Other Spouse(negative = marriage subsidy; positive = marriage penalty)
$0
$20,000 $40,000 $60,000 $80,000 $100,000 $150,000 $200,000
$0 0 -833 -1,834 -3,764 -4,113 -4,713 -6,119 -7,197
$20,000 209 -122 -122 -471 -915 -1,800 -1,664
$40,000 1,477 1,477 1,284 1,284 1,477 1,866
$60,000 1,633 1,884 1,884 3,388 3,777
$80,000 2,135 2,712 4,950 5,339
$100,000 3,946 6,261 7,155
$150,000 9,082 10,644
$200,000 12,075
2002 Tax Rates for Married Couple Filing Jointly
Table 13.4, p. 501
Taxable Income Level Tax Rate for Married Couples Filing Jointly
Up to 12,000 10%
$12,001 to 46,700 15%
$46,701 to 112,850 27%
$112,851 to 171,950 30%
$171,951 to 307,050 35%
307,051 or more 38.6%
Marriage and Tax Liability There is debate on the true impact Nevertheless, it is clear that marriage
can impose additional burden An attempt has been done with the
2001 Tax Relief Act which provides two provisions to attempt to reduce the tax penalty between 2005-2009
Marriage and Tax Liability 2001 Tax Relief Act (2005-2009): Standard Deductions for married
couples will increase as compared to single individuals (see next table)
And the 15% Rate for married couples also will increase for those filing jointly (see next table)
Phase-In attempts to eliminate Marriage Tax Penalty from 2001
Tax Act table 13.5, p. 506
Calendar Year Standard Deduction for Joint Returns as Percentage of Standard DeductionFor Single Returns
End Point of 15% Rate Bracket for Married Couple filing Joint Return as Percentage of End Point of 15% Rate Bracket for Unmarried Individuals
2005 174% 180%
2006 184% 187%
2007 187% 193%
2008 190% 200%
2009 and later 200% 200%
Marriage and Tax Liability There is debate on the true impact Nevertheless, it is clear that
marriage can impose additional burden
In particular the Earn Income Tax Credit can in particular instances reduce the incentive to marry
EITC Benefit Schedule, 2002Table 13.6, p. 510
Subsidy
Rate
Earnings Subsidy
Threshold
Maximum Credit
Phase-Out Rate
Maximum Income for EITC
Eligibility
No Children (recipient must be between the ages of 25 to 64)
7.65% $4,900 $376 7.65%$11,060 (single)
$12,060 (married)
One child34.0% $7,350 $2,506 15.98%
$29,201 (single)$30,201 (married)
Two or more children
40.0% $10,350 $4,140 21.6%$33,178 (single)
$34,178 (married)
Social Security Regressive Tax It currently is set up to benefit
mostly households where the income was obtained primarily from the husband
Average Monthly Benefit by Sex, December 1999
Table 13.8, p. 517
Type of Beneficiary Men Women
Retired worker collecting own earnings record
$951 $729
Spouse $232 $419
Widows/widowers $606 $811
Costs and Benefits of Wife’s Work Under Social Security
Table 13.9, p. 518
Family Earnings Pattern
Increase in Social Security Taxes
Attributed to Wife’s Working
Increase in Social Security Benefits Attributable to Wife’s Working
Husband high/wife average
43.3% 1%
Husband average/wife low
46.6% 1.2%
Husband low/wife low
103.6% 15.2%
Poverty Rates by Age, Race/Ethnicity and Gender
Table 13.10, p. 519
Age All Black Hispanic White
Women Men Women Men Women Men Women Men
65 and over
12.2% 7.5% 25.8% 17.1% 19.6% 17.6% 10.8% 6.5%
75 and over
14.0% 8.2% 29.1% 22.4% 21.8% 13.1% 12.9% 6.7%