September 7, 2015

1513 words 8 mins read

Same-Sex Marriage Is a Tax Problem

Why is government involved in marriage at all? Taxes.

Brian Bollmann makes an excellent point about same-sex marriage.

Brian points out in this post that marriage is not a matter for government; contract law is. Government’s only concern in the case of a marriage is with its contractual implications:

At some point in the short history of the United States (and certainly after the Civil War), state governments stepped onto the wall of separation and began getting involved in the religious institution of marriage in the appropriate area of protecting the rights to property – especially that of women.

Eventually, the state decided it would fully step over the wall of separation, declare itself a religious institution, and start performing government marriages (GMs) outside of the church’s involvement.

Now, it’s decided that it has the right to define and redefine marriage.

Since at least 2010, I have argued that the same-sex marriage debate could be quelled simply by reforming the tax code. Either the Fair Tax or the Flat Tax would end the debate, as it would end government’s attempts to coerce behavior through tax law.

To make my point, here’s an extended excerpt from William F. Buckley’s 1974 book Four Reforms: A Guide for the Seventies. (I don’t usually reprint extended passages from published books, but Four Reforms is extremely difficult to get one’s hands on.):

The federal income tax became a significant social factor with the advent of the Second World War. True, the rates had risen very sharply for a little while during the masochistic enthusiasm of the First World War. But by the late thirties there were only 3 million people who paid federal income taxes, the rest being exempt by virtue of the schedule of exclusions. The World War II tax raised the number of taxpayers to the unprecedented figure of 42 million. And, as had been the case since 1913, there was only the one tax rate per income level. It did not matter whether you were a single wage earner or the working member of a married couple: you paid taxes at the identical rate.

But after the war there was a dawning recognition of the practical uses of the community property law. Six states of the Union had such a law, and residents of these states began to assert their claims vis-a-vis Internal Revenue. What they said was that inasmuch as under the state law that governed them the wife was entitled one-half the husband’s income, then that one-half never was his in any taxable sense. This meant (to speak for convenience’ sake of the husband as the wage earner and the wife as the non-wage earner) that a husband earning $20,000 per year had only to pay federal taxes on $10,000. Granted, the wife would then need to pay taxes on $10,000. But, under the progressive rubric, the sum of the parts is not equal to, rather is substantially less than, the whole. Internal Revenue, sensing the danger in reduced revenues, fought hard to protect its turf. But the Supreme Court ruled that the predatory concerns of the upstart Internal Revenue Service did not supersede the venerable traditions of the six states in question, which inherited their notions of community property from Spanish and French custom.

The advantages of married couple in the six states having been affirmed, they were rapidly advertised, and state legislatures everywhere began to explore proposals to convert their own systems into community property for the sole purpose of getting in on the advantages that now accrued to married people.

Meanwhile pressure on Congress was coming in tangentially. In 1942 a law had innocently passed allowing a previously married man to deduct, for the purpose of computing his tax, any money now paid in alimony to his former wife. That seemed fair. But suddenly married couples discovered that Congress had mad divorce profitable. Paying taxes separately, a divorced couple paid less than when married. In the pragmatic spirit of America couples were being tempted to live together luxuriously in sin rather than parsimoniously in wedlock. Congress did not like that.

And so, to do something on this score and to avert the stampede to convert to community property, Congress reluctantly acted—by extending to married couples everywhere the right to split their income. I say reluctantly because Congress had been warned about the loss in revenue that the universalization of split income would bring. That Congress regretted. On the other hand, it was glad for the occasion to express itself as being in favor of the institution of family, and as not insensible to the extra costs of raising a family, costs which are not, as a rule, part of the burden of the single taxpayer.

Then in 1951 Congress discreetly recognized the category of the unmarried head of a household. What to do about unmarried parents of dependents? Congress decided to give such persons half the advantage of a joint return by married persons. Sin should cost something.

All of this went smoothly except that in due course the single taxpayers developed a class consciousness and began to ask why they were being discriminated against. In tax law it tends to be truer than ever that to favor somebody is almost necessarily to discriminate against somebody else. Lobbyists for the single taxpayer made their points persuasively. Individual taxpayers at the higher brackets found themselves paying as much as 42 percent more, on identical income, than married couples. Why is it the business of Congress, they asked, to penalize bachelorhood and spinsterhood? And to do so, moreover, at one and the same time that Congress is fussing over the population explosion?

When the Tax Reform act of 1969 came along, Congress, weakened by the arguments of the single taxpayers and no doubt influenced by the imminent enfranchisement of Americans between the ages of eighteen and twenty-one, most of whom would vote the first time or two as unmarried wage earners, decided to compromise. So the new law ruled that no single taxpayer could be made to pay to the government in tax more-than-20-percent-more than a married taxpayer in the same bracket.

This by no means appeased the single taxpayers, who redoubled their demand for absolute parity. Whereupon the beleaguered Congress began to hear the cannon of a brand-new enemy, created by fission out of the tax reform law. The latest afflicted class (to be discovered) is the husband and wife who both work and earn a middle-to-high income. They discovered that they now had to pay 19 percent more in taxes than if they were divorced or living together unmarried. A lobby for their relief has of course been born. A bill has been introduced (but does not yet appear to have got anywhere) which specifies, blearily, that no married taxpayer should be made to pay more tax than if he were single. If such a bill is passed, the married person would presumably figure out his tax in his civil capacity as 50 percent of a couple. Then he would figure out his tax as if he were single and pay the lesser figure. Meanwhile, yet another bill has been introduced in behalf of the unmarried, childless taxpayer. That bill says simply that no single taxpayer should be made to pay more tax than he would pay if he were married. That taxpayer, assuming the bill were passed, would figure out his tax as a single person, then figure out his tax if he were married and pay the lesser figure.

It’s a see-saw battle toward fairness. But see-saws are stationary. They give the illusion of movement, but movement is vertical–see-sawers end up precisely where they started. As does the battle to make fair a system of taxes designed to be discriminatory.

The answer is, of course, wholesale tax reform.

As I’ve written many time before, the most marketable solution is the Flat Tax. My hero Jack Kemp promoted the Flat Tax as far back as the 1970s. Accountants will quibble over the numbers, but the basic rules are simple: Exempt the first $35,000 in income, then pay about 20 percent on income above that level. A person making $65,000 a year would figure his taxes as follows:


  • 35,000


x            0.2 

$  6,000

Why exempt $35,000? Because that’s four-times the poverty threshold for a single person (as of 2012, the latest figure I could find.)

Every earner would pay this amount whether single, married, married with children. And regardless of source of income. Yes, the home mortgage deduction would go away, but your taxes would be lower.

As states adopt the Fair Tax or the Flat Tax to replace their existing state income taxes, it would be reasonable for states to exit the marriage business altogether. States would merely enforce contracts and their equitable dissolutions. Marriage would return to its religious or cultural roots, which Brian Bollmann has eloquently described.

Best of all for Tea Partiers, fighting the root cause of the same-sex marriage debate–tax law–allows us to remain true to our organizing principles. And very likely prevail.