Discussing income inequality is all the rage, it seems. The president talks about it nonstop. Occupy Wall Street encampments of 99 percenters continue to dot the country. And the Republican candidates dub any talk of the yawning gap between the haves and have-nots as “class warfare.” But there’s another kind of income inequality that leaves some American families at a greater disadvantage than others — simply because of whom the adults in those families love.
The so-called Defense of Marriage Act (DOMA) bars lesbian, gay, bisexual and transgender (LGBT) couples from availing themselves of many tax benefits that flow freely to heterosexual married couples. Filing joint tax returns is one. Social Security survivor benefits are another. The unfairness is compounded when children are involved. If you thought all gay men and lesbians were wealthy denizens of urban centers, an October 2011 report and a follow-up on economic insecurity released last week by the Center for American Progress, the Family Equality Council and the Movement Advancement Project explode that myth. Raising children is neither cheap nor easy. Doing so as a same-sex couple is more complicated and expensive since our country’s laws haven’t caught up to the fact that gay people actually exist and have families.
The inequity as illustrated by the unfair tax burden on LGBT families is highlighted in Table 7 of the October 2011 report, “All Children Matter,” and is explicitly spelled out on pages 66 - 71. Both the same-sex couple (Steve and William) and the married heterosexual couple (Serena and Teddy) have two children under 12. They have a household income of $45,000, with the primary earner paying $1,000 in tuition costs for the other spouse and $2,800 in child care costs. The similarities end there. The details of the assumptions made can be found at the bottom of the table.
Married heterosexual couple with children
For Serena and Teddy, things are quite simple. Filing jointly, they are able take $27,000 in deductions. This brings their taxable income to $18,000. They owe $1,866 in taxes, which is canceled out by $2,000 in child tax credits. A $50 earned-income tax credit is refunded to them. Would that the same-sex couple were so lucky. .
Same-sex couple with children
Steve earns $40,000. William makes $5,000. Because of DOMA, they are barred from filing jointly. And various child tax credits are denied same-sex couples if the primary earner, such as Steve, is not legally recognized as a child’s parent.
As a result, Steve is only able to take $9,350 in deductions, which brings his taxable income to $30,650. Since he is not recognized as a legal parent of their two children because they live in a state that doesn’t permit gay couples to adopt, Steve can’t take advantage of the child credits the married heterosexual couple can. Because William is not legally recognized as a spouse, Steve can’t deduct the $1,000 he pays in college tuition for him. This leaves Steve with a tax liability of $4,175. William is the legal parent of their children so he gets a larger dependent exemption and gets a $2,000 child credit. In the end, he gets a $2,010 refund. All told, Steve and William owe $2,165 in taxes.
So, this is what income inequality looks like for the gay families raising nearly 2 million children in the United States. In a forthcoming post, I’ll show you another chart that highlights other added costs borne by same-sex families just to stay together. This isn’t fair. This is indefensible. Yet, this is the law of the land. And it will stay that way until DOMA is repealed or the tax code is changed in a way that brings equity and fairness to same-sex families as a matter of course.