MURRAY, Ky. (Sept. 25, 2012) — Dr. Floyd Carpenter and Dr. Murphy Smith of the Murray State University Bauernfeind College of Business, along with Dr. Dennis Lassila of Texas A&M University, will present results of their research regarding the marriage penalty tax in October at the International Conference of the Allied Academies in Las Vegas. The paper is titled, “The Federal Government’s War on Marriage AKA The Marriage Penalty Tax: Unfair to Individuals and Harmful to Society.”
Carpenter is a renowned tax professor in accounting who has received accolades for his teaching and research. Each year, Carpenter oversees the Volunteer Income Tax Assistance (VITA) program at Murray State, which provides income tax assistance to low-income individuals, handicapped persons, or the elderly.
Smith is the David and Ashley Dill Distinguished Professor of Accounting. His academic record includes numerous professional journal articles, academic conference presentations and research grants.
The presenters note that President Abraham Lincoln famously said, “America will never be destroyed from the outside. If we falter and lose our freedoms, it will be because we destroyed ourselves.” Marriage and families are regarded as building blocks of civilization. Yet, in America, numerous parts of the federal tax code directly penalize marriage and have detrimental effect on American families.
“Past research shows that public policy such as tax and transfer programs have had a deleterious effect on marital stability,” Carpenter said. “Our study analyzes the cost to individuals of various aspects of the marriage penalty tax (MPT) and, thereby, how it discourages marriage. This in turn harms both individuals and society at large.”
Decline of the family, especially married couples, is regarded as one of the critical problems facing American society. “Findings of our study indicate that the MPT, by hurting marriage, leads to major social and economic costs, such as higher rates of children living in poverty, lower education, higher unemployment, more crime and poorer health. We conclude that the MPT should be eliminated from the tax code,” said Smith.
“One of the primary societal costs associated with decline of marriage is the negative impact on children. In 1965, the percent of children born to unwed mothers was about 7 percent. In 2009, the birth rate to unwed mothers was at 41 percent, most of whom were young and uneducated, those least able to support their children. The poverty rate for children in married, two-parent families is 6.8 percent versus a poverty rate for children in single-parent, female-headed families of 37.1 percent,” Lassila noted.
“Some have argued that a simple way to have a nuclear family and avoid the marriage penalty is to be unmarried parents, but this does not bode well for children in the long term. Statistics indicate that half of cohabiters split up in five years, compared to only 15 percent of married couples during the same period,” Smith said.
Some opponents to repealing the marriage penalty have complained that higher-income taxpayers receive disproportionate benefit. However, this research shows that the MPT has an equally negative effect on couples in the lowest income categories, particularly with its impact on the earned income tax credit.
Carpenter offers an example. “Consider a couple who are unmarried with adjusted gross income (AGI) of $20,000 each and two qualifying children. They would receive an earned income credit (EIC) of $4,410 in 2011. If they were married, their earned income credit would be reduced to $1,267. In other words, by simply being married, as opposed to unmarried, they incur a marriage penalty of $3,143,” he explained.
The study also evaluates a politically controversial tax proposal of President Obama, in which he proposed eliminating the Bush tax cuts for taxpayers with incomes of more than $200,000 for individuals and $250,000 for couples. The researchers conclude, “Regardless of whether the Bush tax cuts should be extended or not for high-income taxpayers, the marriage penalty in the proposal is unfair. Why should a high-income couple, who are living together but not married, get a lower tax rate than a high-income couple who are married? Since the proposal was to eliminate the Bush tax cuts for taxpayers with incomes of more than $200,000 for individuals, then to eliminate the marriage penalty, the income level for couples should be $400,000 — double $200,000 —not $250,000 for couples.”
“Whether a couple’s income level is low or high, the marriage penalty tax is detrimental to marriage, and thus, to society overall,” Smith added. “Tax laws, as part of public policy, should foster, not hamper, two-parent families and their corresponding economic benefits such as improved employment, better public health and lower crime.”