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Is Our Fiscal System Discouraging Marriage? A New Look at the Marriage Tax

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  • Elias Ilin
  • Laurence J. Kotlikoff
  • Melinda Pitts

Abstract

We provide a new measure of the marriage tax – the percentage change in remaining lifetime (future) spending from marrying. (Equivalently, the increase in future net taxes divided by initial future spending.) We calculate this tax for young respondents to the 2016 Survey of Consumer Finance, impute the tax facing single young respondents to the 2018 American Community Survey (ACS), and study whether the tax alters the ACS respondents’ decisions to marry. We control for endogenous spousal selection by assuming clone marriage – marriage to oneself. Our clone-marriage tax is comprehensive, intertemporal, and actuarial. It includes all key federal and state tax and benefit programs, weighing the present value of extra net taxes along each marital survivor path by the path’s probability. The weighted average marriage tax – 2.69 percent – is very large, corresponding to a year or two of lost earnings for most singles. The range of clone-marriage tax rates – -74.4 percent to 45.8 percent – is equally remarkable. The average marriage tax rate is twice as high for the poor than for the rich and twice as high in some states than in others. Marriage taxation has a small overall impact on marrying, but a substantial impact for subgroups. Absent the tax, 13.7 percent more low-income, single females with children would marry annually and 7.5 percent more would be married by age 35. Our results are robust to assuming ACS singles marry higher- or lower-earning variants of themself and to adjusting for partial benefit takeup. Clearly, making each fiscal policies marriage neutral or using the federal income tax to annually adjust a couple’s total net tax burden to ensure it’s twice that of singles represent two ways to eliminate marriage taxation. An alternative, partial reform lies in adopting universal health insurance whose receipt is not income based. As we show, Medicaid and the ACA embed substantial marriage taxes.

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  • Elias Ilin & Laurence J. Kotlikoff & Melinda Pitts, 2022. "Is Our Fiscal System Discouraging Marriage? A New Look at the Marriage Tax," NBER Working Papers 30159, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:30159
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    References listed on IDEAS

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    Cited by:

    1. David Altig & Laurence J. Kotlikoff & Victor Yifan Ye, 2022. "How Much Lifetime Social Security Benefits Are Americans Leaving on the Table?," NBER Chapters, in: Tax Policy and the Economy, Volume 37, pages 135-173, National Bureau of Economic Research, Inc.
    2. David Altig & Alan J. Auerbach & Erin Eidschun & Laurence Kotlikoff & Victor Yifan Ye, 2024. "Inflation's Fiscal Impact on American Households," NBER Chapters, in: NBER Macroeconomics Annual 2024, volume 39, National Bureau of Economic Research, Inc.
    3. Elias Ilin & Laurence J. Kotlikoff & M. Melinda Pitts, 2022. "Pink and Poverty Taxes on Marriage," Policy Hub, Federal Reserve Bank of Atlanta, vol. 2022(12), October.

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    More about this item

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure
    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy

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