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The Marriage Penalty
I cringe every time I hear or read the words "working poor". Sure, I know it refers to the lower third of the wage earners, but somehow it always seems to mean more than that. It means that most of us who work are not rich. If we were, we would be quite pleased by the recent bill being sent to the President. If he chooses not to veto it as promised, it is the well off who will benefit. But he may find some difficulty in following his conscience. This bill which is headed to the Senate is being touted as "family friendly".
The "marriage penalty" for those that opted for wedlock, benefits those that chose to live together, or who are divorced, or who are married and well-to-do. This flaw in the code, which has been described as one of the most socially damaging taxes isn't even touched by the proposed bill. The penalty does the most damage to those eligible for the earned income tax credit. If you are not familiar with this credit, it is because you labor above the level that would be considered "working poor". This credit, which works like this: earn $12,690 and you are entitled to a credit of $2,353 or $3,888 if they have two or more children. This is gradually reduced by 16 to 21 cents for each dollar in excess of that amount, phasing out completely at $27,432, or $31,152 for two children or more. As long as they remain unmarried.
The "marriage penalty" calculates family earnings which is the combination of two incomes if they are married. If the wage earner remains single, their wages are calculated, not their partners. Why? Because officially, he or she is not part of the family. Marry and the changes can be huge. Especially to a group that counts every penny. This is something that must be fixed if Congress wants the bill to be truly family friendly.
And how would they work for the rest of us? Not much differently.
Under the Standard Deduction Plan
| Income |
Unmarried, each earning half |
Married, filing jointly
|
Under Republican Bill, married/jointly
|
Difference |
Two Earners, Penalty |
One Earner, Bonus
|
| $35,000 |
$3,100
|
$3,300
|
$3,100
|
$200
|
$200 |
$1,050 |
| $40,000 |
$3,850
|
$4,050
|
$3,850
|
$200
|
$200 |
$1,700 |
| $60,000 |
$6,850
|
$7,450
|
$6,850
|
$600
|
$600 |
$1,650 |
The Treasury Department found that 48% of the couple filing last year paid a penalty averaging $1,141. This was most common when the couple earned similar amounts of income.
41% of couple filing actually received a bonus which averaged $1,274, but these tended to be single income households.
The one good thing the bill has to offer is the expansion of the 15% tax bracket from $43,850 to $52,500.
In a radio address during July, Clinton said the Republicans are spending all of the surplus dollars on tax cuts that would benefit the wealthy. Their treatment of the Federal Budget surplus, Clinton said, the Republicans "are acting as if they one the lottery". The BlueCollarDollar will keep you updated as the events occur.
Debt
Is there such a thing as good debt? What do you suppose bad debt is? And what kind do you have?
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