I WENT TO A House Ways and Means Committee hearing Wednesday and ever since I've been thinking about getting a divorce and living in sin. The hearings were on something called the marriage tax, which I used to think was a relatively small matter of several hundred dollars that married professionals pay extra in taxes. I never thought it was particularly fair, but I also realized that people earning $60,000 can handle a little of life's unfairness better than one-income families earning $30,000.
But I've found out a few more specifics about life's unfairnesses. We are not talking about several hundred dollars in extra taxes for married people, except at the $5,000 to $10,000 income level where it hurts most. For married professionals who each earn $35,000, we are talking about $4,234. Married people who each earn $20,000 pay $1,692 more than people who earned that and simply live together. There is, in other words, a real financial penalty to being married.
Gail Jamin, a public relations specialist, and Robert Jamin, an accountant, figured out that they were paying an extra $4,200 a year in taxes because they were married. They got divorced last December, and are continuing to live together in their home in Connecticut, but they don't intend to remarry until the tax law is changed.
And they've set up a sort of cottage industry to help other couples get tax divorces while still providing their ex-spouses some of the legal and financial protections enjoyed in marriage. Their firm, and lawyers they've retained, will handle wills, separation and "palimony" agreements, the divorce, property and insurance transfers, and reciprocal powers of attorney for the spouses. Jamin figures couples will save two dollars for every dollar spent on a tax divorce and that is an expense that occurs only once.
"People are getting divorced and doing it quietly," says Gail Jamin. "We would like them to be aware of the possible pitfalls, and that there are certain legal benefits that accrue to you as a spouse."
The marriage tax penalty came about in 1969 when the tax structure was overhauled to remove an unfair tax burden on single people. Inadvertently, it turned out the single people ended up paying at a lower rate than two-income married people. The net effect of this is that some 19 million two-earner couples are paying a marriage tax to the federal government. Or, as the President's Interdepartmental Task Force on Women puts it, "The U.S. government is collecting $5 to $9 billion in extra taxes from about 19 million two-earner couples . . . simply because they are married rather than living together without being legally married."
"People don't know how much it is," says Gail Jamin. "When they find out they get incensed." Rhoda Glickman of the White House Conference on Families says the marriage tax has come up repeatedly in hearings leading up to the conferences. "We've been impressed and amazed by the number of people who have expressed their anger and resentment about the marriage tax. Most poeple are not aware of it."
The House Ways and Means Committee is considering several proposals to remove the marriage penalty and the one that has the most support so far is a bill introduced by Millicent Fenwick (R-N.J.), in the House and by Charles McC. Mathias, (R-Md.) in the Senate. It would allow two-earner married couples the option of being taxed as single people, with each paying taxes on what he or she earns. This would be done by allowing married people filing separately to use the same tax tables as single people. The bill has the support of 220 members of the House and 24 members of the Senate.
Fenwick's testimony noted that new Census Bureau figures out this week show that the divorce rate has increased 96 percent in the past decade, while the number of people living together has increased 145 percent to 1.3 million. "While these numbers skyrocket, our tax system discourages marriage and families. This is neither prudent nor sensible."
Al Ullman, (D-Or.), chairman of the House Ways and Means Committee, and Barber Conable, (R-N.Y.) the ranking minority member, both favor an income deduction of 10 percent of up to $20,000 of the second income. Estimated revenue loss to the Treasury for this kind of tax cut is under $5 billion, less in other words than the Mathias-Fenwick approach.
Once upon a time, back when he was a candidate, reform of the marriage tax penalty had the support of that great family man, Jimmy Carter. He criticized it as unfair during his campaign and pledged to look at credits as a way of reforming it. So far, President Carter has made much more of a fuss over people living together than he has over the tax penalty on people who are married. And when the deputy assistant Treasury secretary for tax policy, Emil Sunley, testified, he said the administration was not ready now to back any of the proposed reforms.
Samantha Sanchez, a professor of tax law at Catholic University, and a consultant to both the Justice Department's civil rights group and the task force on women, says the tax penalties work a special hardship on women who are most often the second income earners in a family. "She faces the steepest tax rates in the code because her income is taxes on top of her husband's and the rates of progressivity are much higher in the married schedule than in the other schedules."
Sanchez said the task force rejected the Carter campaign promise of tax credits to relieve the inquity as a bandaid that "would do more harm than good, because it will make everybody think you've solved the problem." The task force endorsed the Mathias-Fenwick approach.
Sources on both the Senate Finance Committee and the House Ways and Means Committee indicated that some action on the marriage penalty tax might be taken this session as part of a larger income tax cutting proposal.
"The real question is whether we want to have a tax cut and whether we want to spend that kind of money on married people." said a Ways and Means Committee source. "The apparent determination to balance the budget gets a lot of people off the political hook. The marriage penalty in tight times is put off not because everybody isn't interested but because we can't afford to help them this time around." There is, he said, a "chasm between equity and the price of equity."
Maybe it's the time of year and maybe it's the Carter economy, but I suspect a lot of us are going to find that living in sin is a lot less sinful than it used to be.