They're the buzzwords in Washington these days: "marriage" and "family values." Of course, we're having a little disagreement over how to define them, what with President Bush's marriage initiative and the proposal for a constitutional amendment to define the institution pitted against the fight for same-sex marriages. Still, underlying these divisions is the belief among all groups that family matters. And so Congress strives, in the tax laws, to promote family values.
Lost in the conversation, meanwhile, is any mention of "singles values." But the choice to be single, whether temporary or permanent, should be accorded the same dignity as the choice to marry, shouldn't it? Including under our tax laws. You'd think that Congress, above all, would be sensitive to the interests of singles, because there are so many of them -- every year, there are more single income tax returns filed than joint ones (58 million vs. 51 million in 2001). But if you viewed single people solely by the way Congress chooses to tax most of them, you might think they were, well, almost un-American. The way they're treated isn't fair, and it should change.
You've all heard about the tax system's so-called marriage penalty, which discourages a couple with good incomes from marrying because their combined income taxes would be greater than if they remained single. Congress heard so much about it that, through legislation in 2001 and 2003, it addressed that problem for most couples by increasing their standard deduction and broadening their tax brackets. But a great injustice remains in our tax system: the "singles penalty." The annual income tax deadline arrives this week, and there's no getting around it -- most of us who are married and also have young kids are going to fare a lot better than most of those who haven't tied the knot or had any children.
Don't know anything about this? Well, you should, especially if you are among those single taxpayers who don't itemize their deductions. That's roughly 80 percent of all singles -- a total of about 48 million individuals, if you're counting. While the singles penalty is harshest on lower- and moderate-income earners, it affects all 48 million. Here's why.
Consider first our nation's official poverty thresholds. The threshold for single people last year was about $9,600; but single people who claim a standard deduction on their 2003 returns are expected to begin to pay a tax if their income exceeds a mere $9,300 -- that is, before what they earn has, by the government's own definition, lifted them out of poverty. (The $9,300 tax threshold results from the sum of the personal exemption plus the standard deduction, and the benefit of a small earned income credit.)
So many singles, with modest incomes and modest expenses, depend on the standard deduction -- a measly $4,750 in 2003 -- because it is larger than the sum of what they might itemize. (By contrast, more than half of all joint returns claim itemized deductions.) These singles include many young people and many seniors, but also nearly all people who earn not a whole lot more than the minimum wage and may work two or even three jobs. Many are renters, but Congress prohibits them from deducting any of their rent, even though it often consumes a disproportionate share of their income.
By contrast, Congress views the $19,000 poverty threshold for a working married couple with two young children and typical child care costs as woefully inadequate for purposes of setting their tax threshold. Congress believes that this couple should not begin to pay a penny of income taxes until its income exceeds $47,700, or about 21/2 times its poverty threshold. (To calculate their tax, subtract $12,200 for four personal exemptions and $9,500 for their standard deduction, which leaves $26,000 of taxable income. Taxes tentatively owed: $3,200. Then subtract their tax credits: $2,000 in child credits ($1,000 for each child) and $1,200 in child care credits ($600 for each child), for a total of $3,200. Taxes finally owed: zero.)
That certainly seems reasonable, so single people shouldn't object. But they have every right to ask Congress: Where's your compassion for us?
To understand the harshness of the tax threshold imposed on most singles, let's consider one who earns $9,600 and see what it's like for her to try to live on that amount. Well, it isn't really $9,600, because 7.65 percent is withheld for Social Security and Medicare taxes, and, thanks to Congress, she has to pay a small income tax. That leaves $8,835, or about $740 a month.
Our taxpayer -- let's call her Meg -- lives by herself in an efficiency apartment, doesn't own a car and takes the bus to work and on personal trips. In a typical American city such as Baltimore or Cleveland, she might get that apartment for $350 to $600 a month. Say her rent is $440, which leaves her with $300 to pay for everything else -- food, clothing, furniture, household and personal supplies, telephone, utilities, laundry, sales taxes, public transportation, and much more. (Heaven forbid she should actually buy a magazine or go to a movie.) Health insurance alone -- she doesn't qualify for Medicaid because she doesn't have a dependent child -- would consume much of the $300, so she goes without it and crosses her fingers. It isn't really a choice anyway: Meg runs out of money before she finishes paying her other bills.