Taxes are on everyone’s mind this time of year. The general belief is that married couples can benefit from increase allowable deductions, however recently I’ve come across some information that shows otherwise.
I read an interesting study by Edward McCaffery by the National Center for Policy Analysis about the high disconnect between the way women participate in the economy and how we are taxed. I was surprised to learn that the major elements of the tax system were put in place in the 1930s, 1940s and 1950s, when most women, certainly most mothers, were not in the workforce.
Today 70 percent of all married women work for wages
60 percent of mothers with children under the age of 6 work for wages.
Yet, the tax laws are biased toward single-earner households in which only one spouse works and biased against two-earner households.
Cafferty states that the "marriage penalty" in the tax code is tax on two earner households. When a wife enters the labor market, even if she earns only the minimum wage, she is automatically in her husband’s tax bracket. Moreover, even if her husband has paid the maximum Social Security tax, the wife who works must begin paying from the first dollar she earns.
“Combine a 28 percent federal income tax with an 8.5 percent state and local income tax, then add a 7.65 percent Social Security (FICA) payroll tax, and the marginal tax rate of the second earner in the average household is more than 44 percent. Some married working women actually lose money by entering the labor market.
These marriage penalties hit at the top and the bottom of the income ladder. It hits those at the top particularly hard because high-income earners are in the top tax brackets. “
McCaffery found that :
If you are middle- to upper-income and married, the incentive is not to work.
If you are low-income and working, the incentive is not to marry.
He states that the following reforms should happen to bring our tax system into the 21st century:
Change the income tax law to permit each married partner to file separately and avoid unfair penalties for working wives.
Allow a second-earner exemption which would let couples deduct work-related expenses associated with two earner households when calculating income taxes.
Perhaps it is time for reform and it is time to reconnect with the american household in 2009.
For more information: Email ZZEITOUNI@GMAIL.COM or call 866-285-9828
Comments
Thank you for shining a light on this issue. At the National Center for Policy Analysis' Family Policy Center, we are focused on solutions like: Married couples should be allowed to file jointly or as singles, so that workers with similar incomes pay comparable taxes. And allowing stay-at-home spouses who save for retirement or purchase health insurance or day care services to receive just as much tax relief as people who obtain these benefits at work. We no longer live an Ozzie and Harriet lifestyle and our labor laws need to move into the 21st Century! Terry Neese, Distinguished Fellow, NCPA
In your article you mention that 30% of married women don't work. The other unfortunate & unmentioned part is that those of us who do work (whether married or single) are paying taxes so that the non-working spouses can automatically collect a monthly ck. for 50% of what their working spouses collect in retirement. That isn't very fair to those of us who do work. That rewards those who don't work. Isn't that why welfare has all but disappeared in many states? A non-working spouse who hasn't contributed to Soc Sec at all, or very little, will collect $240,000 if she only collects monthly checks for 20 years & only collects $1,000/month. If she lives 25 years, she will collect $300,000 without working at all, or working very little. The non-working spouse isn't retiring ... why does she get a retirement ck. every month just because her spouse worker? People who don't work don't get unemployment, disability, or workman's comp. Why do they get FREE retirement money when they're not "retiring?" Social Security can't sustain this rate of entitlement bailout any longer!
I am a woman and I have worked most of my life except the
past ten years. I disagree with the objection to a spouse/wife receiving 50% of her spouses/husband's social security. First of all he worked for it and if he or she
doesn't receive it the money is kept by the government and they blow it. Many times the wife stayed home and took many responsibilities off of the husband so that he could be more effective at his job. They may have owned a business and he may have been the only one to receive a salary and therefore he was the only one to build up social security.
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