Putting your taxes together, you may have noticed that many details of your personal life change how much you pay. Are you married? Do you have kids? Do you pay for child care, or does one parent stay home?
These details and their accompanying policies are, essentially, the tax code’s answer to the “mommy wars” between working mothers and their stay-at-home counterparts, providing at least a little of something to everyone: better tax brackets for this, a credit for that. It can be hard for an individual taxpayer to figure out what they owe–and even harder for the concerned citizen to figure out how it all adds up across society and which types of families receive the most favorable treatment.
In a new report for the Manhattan Institute, I took a shot at adding it up. I wrote a computer program that simulates how different types of families are taxed over the course of their lives. With admittedly generous simplifying assumptions (such as that these couples live their entire lives in the year 2022, Groundhog Day-style), it illustrates how tax burdens change with marital status, children, and income.
My findings suggest the upshot is that the status quo is particularly friendly to traditional–yet no longer quite so common–households with a breadwinner and a homemaker, and particularly neglectful toward couples with kids in which both partners earn similar incomes.
Take someone who earns the median wage for a full-time worker for each age from 23 to 65, which averages out to around $55,000 a year. As a single individual, they’ll pay about $200,000 in income taxes over the course of their life. But if they add a non-working spouse, that drops all the way to $125,000. This is sometimes referred to as the “breadwinner bonus”–and it happens because the tax brackets for married couples are (except for the very rich) twice as large as the brackets for singles.
That same feature of the tax code implies that when two people with equal incomes marry, they at least won’t be punished, since their tax thresholds double along with their combined income. This is true for single individuals, but not for single parents.
Single parents lose head-of-household status if they marry, and can also lose the Earned Income Tax Credit, the phase-out thresholds of which do not double with marriage. Two adults with incomes in the bottom 25th percentile and two kids, whose combined incomes average around $65,000, provide a dramatic example: They pay about $100,000 in lifetime income taxes if they’re married, and only $30,000 if not.
Ultimately, the tax code does a few things well. It reduces taxes for people with lower incomes through progressive rates, for parents in general through the Child Tax Credit, and for seniors by excluding a lot of Social Security income from taxation. But while couples with a breadwinner and single parents benefit from further help, dual earners with kids are quite often treated worse than if they were unmarried.
There are many ideas for addressing these biases. Some have suggested giving secondary earners a special tax break. Others, especially on the left, have long argued in favor of aggressively subsidizing child care (though this subsidizes both dual earners and single parents–basically anyone without a spouse or other family member who is available to watch kids).
My idea, however, is this: Tax people as individuals rather than on their joint income, as many other countries do, and which–thanks to the long-term rise of women’s work and wages–would now benefit about half of Americans. Allow the higher-earning spouse to use the head-of-household status if children or an adult unable to work are present in the picture.
This would mean a tax hike for couples with a breadwinner and a tax break for dual-earning couples with kids. But to be clear, I don’t suggest this out of a desire to shape others’ behavior or enmity toward breadwinner households: I’ve even spent time as a stay-at-home dad myself, though I still worked part-time. I say it because this change would address unfairness in the current system.
Robert VerBruggen is a fellow at the Manhattan Institute.
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