An analysis of recent tax reforms from a marital-bias perspective: It is time to oust marriage from the tax code

Wisconsin Law Review

Volumn 2008, Issue 3, 2008, Pages 611-654

  Richards, Wendy ^a  

^a UNIVERSITY OF WISCONSIN LAW SCHOOL   (United States)

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EID: 46049115486     PISSN: 0043650X     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Note

References (310)

1. Society expresses its values through the tax code. Taxing an activity - or not taxing it - demonstrates how accepted and encouraged that particular activity is in society. Through taxes, the government imposes a burden on certain activities, while tax credits can serve as an incentive for other behaviors. See, e.g., infra note 172.
2. EDWARD J. MCCAFFERY, TAXING WOMEN 1 (1997).
3. Shari Motro, A New "I Do": Towards a Marriage-Neutral Income Tax, 91 IOWA L. REV. 1509, 1518 (2006) (suggesting an approach that focuses on legal entitlement to income).
4. Id.
5. The tax code featured a joint-filing system beginning in 1948. See infra notes 6-7 and accompanying text.
6. MCCAFFERY, supra note 2, at 54. Choosing to file separately does not allow married taxpayers to escape the marital tax brackets. See infra Part I.B. Filing separately would just split the couple's bracket in half. No matter how they file, the couple's tax bracket is assigned on the basis of the fact that they are married. Married taxpayers do not qualify for the same tax brackets as single taxpayers. See I.R.C. § 1 (West 2007); Rev. Proc. 2007-66, 2007-45 I.R.B. 970, 971-72 (2008 Rate Tables).
7. In an early case, the United States Supreme Court held that couples in community-property states could split their income for tax purposes, regardless of who earned it. Poe v. Seaborn, 282 U.S. 101, 113, 118 (1930). Yet couples in non-community-property states could not accomplish this result through private contracts. See Lucas v. Earl, 281 U.S. 111, 114-15 (1930) (holding that a California couple could not contractually arrange to split their income for tax purposes). States quickly enacted pseudo-community-property laws to give their residents tax benefits. MCCAFFERY, supra note 2, at 45-55. To keep couples in community-property states from having a tax advantage over couples in other states, Congress instituted the joint return. Id. After this change in the code, states that had recently passed community-property statutes promptly abandoned that status. Id. Several critics argue that states wanted to confer tax benefits to property owners (mostly men) without having to force them to share their property with their spouses. See, e.g., Carolyn C. Jones, Split Income and Separate Spheres: Tax Law and Gender Roles in the 1940s, 6 LAW & HIST. REV. 259, 295-96 (1988);
8. Edward J. McCaffery, Taxation and the Family: A Fresh Look at Behavioral Gender Biases in the Code, 40 UCLA L. REV. 983, 989-91 (1993) (explaining the "remarkable bit of social history" accompanying the joint return).
9. MCCAFFERY, supra note 2, at 54-55. The income shift mostly benefited men, as most women did not participate in the labor force at the time. Id. at 51. For a tool to track women's participation in the workforce over time, see Bureau of Labor Statistics, Employment Status of the Civilian Population by Sex and Age, http://stats.bls.gov/webapps/legacy/ cpsatab1.htm (last visited Mar. 5, 2008). Joint filing now accomplishes what private contract could not. Cf. supra note 7.
10. See Motro, supra note 3, at 1543-49.
11. MCCAFFERY, supra note 2, at 141-42.
12. Most couples earn dual, as opposed to single, incomes. See U.S. Census Bureau, America's Family and Living Arrangements: 2006 tbl.FG2, http://www.census.gov/population/www/socdemo/hh-fam/cps2006.html (last visited Mar. 5, 2008).
13. See generally ELIZABETH WARREN & AMELIA WARREN TYAGI, THE TWO-INCOME TRAP (2003) (explaining that most families today need two incomes for necessary fixed costs).
14. MCCAFFERY, supra note 2, at 16-20 (defining secondary earner and stacking effect).
15. The ability of married couples to file separately does not impact this issue as there is no tax benefit. Married persons filing separately almost always pay more taxes. Id. at 16; see also infra Part I.B.2 (discussing how filing separately is not the same as filing as a single person).
16. For example, if a couple has two earners, each making the same amount, one will pay more tax on their income. Consider a couple with $50,000 taxable earnings each, for a total taxable income of $100,000. The total tax under the 2008 rate schedule is $17,688. See Rev. Proc. 2007-66, 2007-45 I.R.B. 970, 971-72 (2008 Rate Tables). However, broken down by income, one spouse is contributing $6,698 to the tax bill, while the other contributes a larger share, $10,990. (This calculation is achieved by using the joint tax rates on $50,000 and then taking the difference from the total tax bill.) The couple's first $50,000 is taxed at a lower rate than the couple's second $50,000, creating a secondary earner. Notice that the tax on a couple with only one spouse working and earning $100,000 as an individual would be the same, but there is no secondary-earner bias since the income is generated by only one person and the tax is paid by only one person. See id. This bias is often mistaken as the marriage penalty. See MCCAFFERY, supra note 2, at 19.
17. MCCAFFERY, supra note 2, at 19. It does not matter whether couples understand the stacking effect. The point is that couples respond to the stacking effect when making decisions. See id. at 11-12 ("[W]omen [secondary earners] are not always . . . conscious of the effects [of taxes]. But tax exerts major pressures on all women.").
18. Id. at 19. Other commentators disagree and argue that the proper way to view the joint schedules is to evenly split the tax bill. They argue that since both incomes contribute to the taxes, the tax bill should be seen as equally divided among the incomes. See, e.g., id. (citing HAROLD M. GROVES, FEDERAL TAX TREATMENT OF THE FAMILY 106-07 (1963)). However, since the marital brackets are not double the single brackets, it seems more logical to view the higher income as the one that uses up the lower tax rates, causing the secondary income to be taxed at a higher rate. See id.
19. Id. at 21, 23 (noting that most women earn less and that women are usually the secondary earner); U.S. DEP'T OF LABOR, WOMEN IN THE LABOR FORCE: A DATABOOK 66 tbl.25 (2005), available at http://www.bls.gov/cps/wlf-databook-2005.pdf (showing that an increasing number of women are making more money than their husbands);
20. U.S. Census Bureau, Married Couple Family Groups: 2006 tbl.FG3, http://www.census.gov/population/socdemo/hh-fam/cps2006/tabFG3-all.xls (last visited Mar. 23, 2008) (showing that only 18 percent of wives earn more than their husbands but that 25 percent of couples have roughly equal earnings).
21. See Kyra Kyles, Making Strides: Women Are Closing the Gap at Work, but It's Not All Equal Yet, CHI. TRIB., Mar. 14, 2006 (discussing the pay gap between women and men).
22. See BUREAU OF LABOR STATISTICS, U.S. DEP'T OF LABOR, CHARTING THE U.S. LABOR MARKET IN 2005 chts.5-8, 5-10 & 6-3 (2006), available at http://www.bls.gov/cps/labor2005/chartbook.pdf (showing an increasing presence of mothers in the workforce and increased incomes for women with respect to men);
23. U.S. CENSUS BUREAU, AMERICA'S FAMILY AND LIVING ARRANGEMENTS: 2003, at 10 (2004) (showing significantly more stay-at-home mothers than fathers);
24. U.S. Census Bureau, Married Couple Family Groups: 2006 tbl.FG1, http://www.census.gov/population/socdemo/hh-fam/cps2006/tabFG1-all.xls (last visited Mar. 13, 2008) (2007 data still show more stay-at-home mothers).
25. Rev. Proc. 2007-66, 2007-45 I.R.B. 970, 971-72 (2008 Rate Tables).
26. Work done in the home without compensation is called imputed income and is not taxed. See Nancy C. Staudt, Taxing Housework, 84 GEO. L.J. 1571, 1576 & n.18 (1996) ("[E]conomic benefits received from self-supplied services or services from a family member are exempt from taxation."). For why homemakers are more likely to be women, see infra Part I.C.4 and sources cited supra note 17.
27. See infra Part I.C.
28. See infra Part.I.C. Of course, this argument applies with equal force if the father is the secondary earner and is facing the decision of staying at home with the children or working outside the home. More fathers are becoming secondary earners. See U.S. Census Bureau, supra note 17.
29. MCCAFFERY, supra note 2, at 59, 163 ("[N]o one at all seemed to be thinking of the biases against working wives . . . .").
30. Id. at 51; see also Marjorie E. Kornhauser, A Legislator Named Sue: Re-imagining the Income Tax, 5 J. GENDER RACE & JUST. 289, 290 (2002) (noting that female policy makers make different choices, including on tax policy; "women legislators, regardless of whether they are feminists, act differently from male ones[;] and . . . the presence of female legislators makes a difference").
31. MCCAFFERY, supra note 2, at 57 (noting that women had little representation in Congress in 1948). In 2006, voters elected the largest percentage of women to both houses of Congress, but women still remained a small minority. See Katharine Mieszkowski, Most. Women. Leaders. Ever!, SALON, Nov. 8, 2006, http://www.salon.com/mwt/ broadsheet/2006/11/08/women/print.html (noting that more women were elected in 2006 than ever before);
32. Breaking Through; Pelosi's Ascent to House Speaker a Boost for Women in U.S. Politics, CHI. TRIB., Jan. 4, 2007 (noting that women now occupy 16 percent of the House of Representatives).
33. See MCCAFFERY, supra note 2, at 33, 57, 244 (explaining that in the 1950s, marriage worked against women joining the workplace).
34. See U.S. CENSUS BUREAU, supra note 19, at 3 tbl.1 (family statistics).
35. This concern applies to most families. See id. See generally R. Michael Alvarez & Edward J. McCaffery, Gender and Tax, in GENDER AND AMERICAN POLITICS 91, 91-113 (Sue Tolleson-Rinehart & Jyl J. Josephson eds., 2000) (gender and tax law).
36. See The Changing American Family, N.Y. TIMES, May 18, 2001, at A18 (reporting census data); U.S. Census Bureau, supra note 19, at 3 (family statistics); U.S. Census Bureau, supra note 19 (family statistics).
37. For general criticisms of the joint return and a discussion of how the tax code affects women, see MCCAFFERY, supra note 2; Anne L. Alstott, Tax Policy and Feminism: Competing Goals and Institutional Choices, 96 COLUM. L. REV. 2001 (1996);
38. Grace Blumberg, Sexism in the Code: A Comparative Study of Income Taxation of Working Wives and Mothers, 21 BUFF. L. REV. 49 (1971);
39. Lora Cicconi, Competing Goals amidst the "Opt-Out" Revolution: An Examination of Gender-Based Tax Reform in Light of New Data on Female Labor Supply, 42 GONZ. L. REV. 257 (2006-07);
40. Marjorie E. Kornhauser, Love, Money, and the IRS: Family, Income-Sharing, and the Joint Income Tax Return, 45 HASTINGS L.J. 63 (1993); Staudt, supra note 21;
41. and Lawrence Zelenak, Marriage and the Income Tax, 67 S. CAL. L. REV. 339 (1994) [hereinafter Zelenak, Marriage and the Income Tax].
42. For an analysis of this growing body of literature, see Lawrence Zelenak, Taking Critical Tax Theory Seriously, 76 N.C. L. REV. 1521 (1998) [hereinafter Zelenak, Critical Tax Theory].
43. See Warren Vieth, U.S. Tax Code May Be Facing a Full Rewrite, L.A. TIMES, Nov. 7, 2004, at 27 (comparing historical tax reforms to more recent proposals).
44. See McCaffery, supra note 7, at 988-94 (describing the institution of the joint return in 1948).
45. Modern families no longer resemble the traditional family. See supra note 30 and accompanying text. The tax code should "put one and two-earner families on nominally equal footing." McCaffery, supra note 7, at 1059. Zelenak suggests that the tax code should not take sides in the marriage debate. Lawrence Zelenak, Tax and the Married Woman, 70 S. CAL. L. REV. 1021, 1033-34 (1997) (book review).
46. Under President Bush, Congress has passed numerous reforms in recent years. See, e.g., Tax Relief and Health Care Act of 2006, Pub. L. 109-432, 120 Stat. 2922; Tax Increase Prevention and Reconciliation Act of 2005, Pub. L. No. 109-222, 120 Stat. 345; American Jobs Creation Act of 2004, Pub. L. No. 108-357, 118 Stat. 1418; Working Families Tax Relief Act of 2004, Pub. L. No. 108-311, 118 Stat. 1166; Jobs and Growth Tax Relief Reconciliation Act of 2003, Pub. L. No. 108-27, 117 Stat. 752; Job Creation and Worker Assistance Act of 2002, Pub. L. No. 107-147, 116 Stat. 21; Economic Growth and Tax Relief Reconciliation Act of 2001, Pub. L. No. 107-16, 115 Stat. 38; see also Grover G. Norquist, Editorial, Outside View: A Tax Cut Every Year, UNITED PRESS INT'L, Sept. 2, 2004 (describing the prolific tax cuts).
47. See supra note 35.
48. The literature began with Professor Blumberg's article in 1971. See Blumberg, supra note 31. However, many scholars began an intensive review of her ideas in the 1990s. See, e.g., Alstott, supra note 31; Kornhauser, supra note 31; Staudt, supra note 21. These critiques culminated in Professor McCaffery's book. See MCCAFFERY, supra note 2. Representative Barbara Kennelly, a former member of the House Committee on Ways and Means, seemed to respond to this growing body of literature by requesting a study on how the federal tax laws impact the taxes of married couples. See CONG. BUDGET OFFICE, FOR BETTER OR FOR WORSE: MARRIAGE AND THE FEDERAL INCOME TAX (1997) (comprehensive study on marriage and the income tax). For more examples of this growing body of literature, see sources cited supra note 31.
49. The debate that did happen mostly focused on secondary-earner issues rather than the underlying marital bias. See CBO Testimony on Marriage and the Federal Income Tax before the H. Comm. on Ways & Means, 105th Cong. (1998) (statement of June E. O'Neill, Director, Cong. Budget Office), available at http://www.cbo.gov/ftpdocs/3xx/doc322/020498.pdf. The Ways and Means Committee report on this issue has been virtually ignored by Congress since its completion in 1997. See CONG. BUDGET OFFICE, supra note 37 (suggesting reforms, none of which have been enacted).
50. See infra Part IV for a discussion of how the decrease in marginal rates, the reduction of the marriage penalty, and the increases in the child-care credit have helped ease the burden on the secondary earner.
51. See, e.g., sources cited supra note 19 (regarding the presence of women in the workforce).
52. Married persons can file either joint or separate returns. See I.R.C. § 1 (West 2007). Single persons enjoy a larger tax bracket and single taxpayers that qualify to file as "Heads of households" have the largest tax brackets that an individual may claim. Id. A married person may not file as a head of household or as a single person. Id.; see also Part I.B.2 (explaining that separate returns for married couples are still based on marital tax brackets).
53. See U.S. CENSUS BUREAU, supra note 19, at 3 (statistics).
54. See, e.g., MCCAFFERY, supra note 2, at 277-78 (suggesting that Congress tax married men more); Motro, supra note 3, at 1518 (suggesting an approach that focuses on legal entitlement to income); Zelenak, Marriage and the Income Tax, supra note 31, at 405 (arguing that the current tax treatment of marriage gets it wrong).
55. This is what Professor Zelenak and others propose. See, e.g., Amy C. Christian, The Joint Return Rate Structure: Identifying and Addressing the Gendered Nature of the Tax Law, 13 J.L. & POL. 241, 246 (1997) (criticizing the joint return); supra note 31 (collecting sources); see also infra Part IV.A.1.
56. This is what Professor Motro proposes. Motro, supra note 3, at 1543-44 (suggesting an approach that focuses on legal entitlement to income).
57. See infra Part IV.C.
58. See generally sources cited supra note 31.
59. McCaffery, supra note 7, at 993.
60. Id. at 991.
61. See id. at 996. The effects are most dramatic when both spouses have roughly equivalent incomes. See CONG. BUDGET OFFICE, supra note 37, at 19.
62. See supra note 7 and accompanying text.
63. Zelenak, Marriage and the Income Tax, supra note 31, at 339-42.
64. McCaffery, supra note 7, at 989-94.
65. Id. The tax code basically pretends that both spouses contribute toward the income. See id. at 991.
66. See id. at 993; CONG. BUDGET OFFICE, supra note 37, at 1 (finding that current marriage bonuses cost billions of dollars each year).
67. See McCaffery, supra note 7, at 991.
68. See Motro, supra note 3, at 1518.
69. See Kornhauser, supra note 31, at 105-06 (questioning the assumption that married couples actually share money equally).
70. Lucas v. Earl, 281 U.S. 111, 114-15 (1930), held that money has to be attributed to the one who earns it. On the joint, return both spouses are jointly and severally liable for reporting the tax correctly, leading to the "innocent-spouse" problem when the income earner evades taxes and leaves the homemaker liable for paying them. See, e.g., Amy C. Christian, Joint and Several Liability and the Joint Return: Its Implications for Women, 66 U. CIN. L. REV. 535, 536-37 (1998); Motro, supra note 3, at 1532;
71. Christopher B. Wyrick, Comment, Till Death Do Us Part - Including Our Taxes: Inequity Abounds in Spousal Joint and Several Tax Liability and the "Innocent Spouse" Rule, 6 KAN. J.L. & PUB. POL'Y 163, 163-64 (1997).
72. While the couple could file separate returns, tax rates always depend on marital status. Thus, even on separate returns, the tax code indirectly taxes them as one unit. See infra Part I.B.2.
73. Motro, supra note 3, at 1513-14 & n.8 (citing examples of same-sex couples, relatives, friends, and others who live together, share finances, and function as a family but are denied the marriage bonuses sometimes enjoyed by traditional couples).
74. Congress instituted the joint return in 1948, making the married tax brackets double the size of the single brackets. Revenue Act of 1948, Pub. L. No. 471-168, tit. III, pt. I, 62 Stat. 110, 114-16.
75. See id.
76. For example, a married person earning $10,000 enjoyed the same tax rate as a single taxpayer earning only $5,000. See id. The higher the taxpayer's earnings, the greater the tax benefit of shifting some of this income into lower tax brackets via joint filing. See id.
77. For example, a married person with a stay-at-home spouse could now earn twice as much as a single person and stay in a lower rate bracket. See id.
78. See Tax Reform Act of 1969, Pub. L. No. 91-172, § 803, 83 Stat. 487, 678-81. This act reduced the tax brackets for joint filers so that they were no longer double the brackets for single filers, thus introducing marriage penalties. Id. The brackets were still larger than the brackets for single filers, so many couples still enjoyed a marriage bonus. But it was less than it was before. Id.
79. Rev. Proc. 2007-66, 2007-45 I.R.B. 970, 971-72 (2008 Rate Tables). Tax rate tables are found in section 1 of the Internal Revenue Code, but the amounts are updated each year to account for inflation, usually through a revenue ruling. I.R.C. § 1(f) (West 2007).
80. See MCCAFFERY, supra note 2, at 19-20.
81. See infra Part I.C.
82. See CONG. BUDGET OFFICE, supra note 37, at 59-60.
83. For the purposes of this Comment, developed countries refers to countries in the Organization for Economic Cooperation and Development (OECD).
84. CONG. BUDGET OFFICE, supra note 37, at 59. ("In 1993, of the 27 countries in the Organization for Economic Cooperation and Development (OECD), 19 imposed income taxes separately on husbands and wives . . . ."). Professor Zelenak has argued that separate taxation is feasible in the United States. See Lawrence Zelenak, Doing Something About Marriage Penalties: A Guide for the Perplexed, 54 TAX L. REV. 1, 46-47 (2000).
85. Each taxpayer stands alone, so there is no secondary earner, although the concept could be reintroduced through tax credits or other mechanisms.
86. CONG. BUDGET OFFICE, supra note 37, at 59-60.
87. Id.
88. See supra Part I.A.1-2.
89. CONG. BUDGET OFFICE, supra note 37, at 59; Ayla A. Lari, Sharing Alike: French Family Taxation as a Model for Reform, 37 DUQ. L. REV. 207, 231-42 (1999) (describing the French system as it existed in 1995 under L'impôt sur le revenu as codified in the Code Général des Impôts).
90. Splitting income allows the shift that is inherent in the stacking effect. See supra Part I.A.1-2. Lari notes that the French tax code was intended to benefit the traditional one-earner family. Lari, supra note 77, at 240.
91. In France, substantial marriage penalties exist for dual-earning couples, just as they do in the United States. Lari, supra note 77, at 241.
92. CONG. BUDGET OFFICE, supra note 37, at 59.
93. Id. Marriage bonuses are due to the large brackets for joint taxpayers in Germany. Id.
94. Id.
95. Id. at 60.
96. Id. at 59-60.
97. Id.
98. Id. at 59.
99. Id. (finding that most countries tax income on an individual basis).
100. See infra Part IV.A.
101. See Zelenak, supra note 72, at 46-47.
102. See CONG. BUDGET OFFICE, supra note 37, at 59-60.
103. See infra Part IV.A.
104. See infra Part IV.B-C.
105. Not all dual-earning couples necessarily face a marriage penalty. A penalty only results when the combined income of the spouses reaches a higher tax bracket than it would if the spouses filed as single taxpayers. See I.R.C. § 1 (West 2007); CONG. BUDGET OFFICE, supra note 37, at 1 (discussing marriage penalties).
106. Zelenak, Marriage and the Income Tax, supra note 31, at 339.
107. Zelenak, supra note 34, at 1022. For example, imagine a couple where each spouse has $85,000 of taxable income each year. Under the 2008 rate tables, before marriage their total tax bill would have been $35,557 (two single taxpayers). After their marriage, their tax bill rises to $36,344 ($170,000 on a joint return). The additional $787 in tax is the marriage penalty on that couple. See Rev. Proc. 2007-66, 2007-45 I.R.B. 970, 971-72 (using 2008 Rate Tables).
108. See MCCAFFERY, supra note 2, at 23-26. This result should be expected because with two incomes, the couple cannot split one of the incomes into a lower tax bracket as traditional families do.
109. See supra Part I.A.1-2.
110. See CONG. BUDGET OFFICE, supra note 37, at 1.
111. Id.
112. Zelenak, supra note 34, at 1022.
113. See I.R.C. § 1 (West 2007) (separate filing status allowed).
114. See SAMUEL A. DONALDSON, FEDERAL INCOME TAXATION OF INDIVIDUALS 7 (2005) ("In the vast majority of cases, married couples pay less total tax if they file a joint-return.") Filing separately does not allow the higher-earning spouse to shift income to the lower-earning spouse; instead, each spouse uses half of the marital brackets to file his or her income. Yet the tax brackets for each individual spouse are smaller than those for a single taxpayer, so the couple is not filing in the same brackets as a single person would. Unless the couple's salaries are substantially equal, if they file separately, one of their incomes will likely fall into a higher tax bracket than it otherwise would, resulting in more total tax for that couple. See I.R.C. § 1; Rev. Proc. 2007-66, 2007-45 I.R.B. 970, 971-72 (2008 Rate Tables); MCCAFFERY, supra note 2, at 66 (referencing income splitting). However, the separate tax brackets for married taxpayers are smaller than those for single taxpayers. See I.R.C. § 1.
115. See I.R.C. § 1; Rev. Proc. 2007-66, 2007-45 I.R.B. 970, 971-72 (2008 Rate Tables).
116. This follows from the fact that without income shifting, the spouses' highest tax rate applies to more income than it would with the combined brackets. See I.R.C. § 1; Rev. Proc. 2007-66, 2007-45 I.R.B. 970, 971-72 (2008 Rate Tables).
117. As Professor Zelenak summarizes Professor McCaffery's argument, "At lower income levels, the need for cash income is so great and the marriage penalties are so severe that the most likely effect of the tax rules is not that wives stay home but that marriages fall apart." Zelenak, supra note 34, at 1022-23.
118. See MCCAFFERY, supra note 2, at 138-42, 145-50.
119. See Steuerle Addresses Marriage Penalties at Ways and Means Panel Hearing, TAX NOTES TODAY, May 23, 2001, http://www.taxanalysts.com.
120. Anne L. Alstott, The Earned Income Tax Credit and the Limitations of Tax-Based Welfare Reform, 108 HARV. L. REV. 533, 558-64 (1995) (noting that under a joint return, credits like the Earned Income Tax Credit automatically include trade-offs like marriage penalties); Zelenak, supra note 72, at 46-47;
121. see also Lawrence Zelenak, Redesigning the Earned Income Tax Credit as a Family-Size Adjustment to the Minimum Wage, 57 TAX L. REV. 301 (2004) (proposing that the Earned Income Tax Credit be directly tied to wages and family size).
122. See MCCAFFERY, supra note 2, at 138-42, 145-50.
123. See, e.g., Welfare to Work, http://www.opm.gov/wtw/index.htm#intro (last visited Mar. 15, 2008).
124. See MCCAFFERY, supra note 2, at 138-42, 145-50.
125. See I.R.C. § 32 (2000) (prior to the Bush-administration tax reforms). In other words, if the taxpayer married another person with an income, the phaseout amount did not change, but, of course, the amount of income on their joint return increased because the family had two incomes instead of one. This makes sense if the low-income taxpayer married a wealthy individual but makes less sense if both of the taxpayers relied on the credit before marriage. The couple already lost one credit by marriage, but their remaining credit could also phase out if their combined incomes reach the phaseout range. This creates a double setback for low-income taxpayers contemplating marriage. See CONG. BUDGET OFFICE, supra note 37, at 17-18. For a discussion on how the recent tax cuts slightly changed the Earned Income Tax Credit, see infra Part III.B.
126. I.R.C. § 32 (2000) (prior to the Bush-administration tax reforms). For a full description of the pre-2001 penalties, see CONG. BUDGET OFFICE, supra note 37, at 17-20, and Alstott, supra note 108, at 559-64.
127. See infra Part III.B.
128. I.R.C. § 32 (2000) (prior to the Bush-administration tax reforms).
129. See CONG. BUDGET OFFICE, supra note 37, at 23. Under the 1996 tax laws, the report finds a marriage penalty of $6,001 for married taxpayers with four children, with each spouse earning $11,610. Id. This is a hefty penalty for a family of four with a household income under $25,000. Considering that the minimum wage in 1996 was $4.75 per hour, for an annual income of $9,880 (working full time), two taxpayers that earned just above the minimum wage would lose $6,000 just by getting married. See 29 U.S.C. 206 (1996) (setting the minimum wage at "not less than $4.75 an hour during the year beginning on October 1, 1996"). In his calculations for 2003, Professor Hoffman found a marriage penalty of $6,886 for married taxpayers with four children, with each spouse earning $15,000. Saul D. Hoffman, Marriage Tax Relief in the Earned Income Tax Credit, 104 TAX NOTES 935 (2004). While it may be argued that the couple's expenses are less because they share living expenses, it is unlikely that this offsets a more than $5,000 tax penalty (over $400 a month), especially considering that the expenses for the children will remain relatively constant.
130. See Adam Carasso & C. Eugene Steuerle, The Hefty Penalty on Marriage Facing Many Households with Children, THE FUTURE OF CHILDREN, Fall 2005, at 157, 157-61 (noting that poor households face high marriage penalties, yet marriage is beneficial to fight poverty);
131. Robert Rector, How Not to Be Poor, NAT'L REV., Oct. 24, 2005, at 26 (most federal aid goes to unwed parents).
132. See, e.g., A Good Poverty Report, WASH. POST, Sept. 28, 2000, at A30 (discussing the Clinton-administration welfare reforms); sources cited supra note 117 (noting that marriage is beneficial to fight poverty).
133. See, e.g., Cheryl Wetzstein, U.S. Out of Love with Marriage?, WASH. TIMES, Dec. 26, 2006, at A1 ("[B]oth Republicans and Democrats think marriage matters . . . .").
134. Zelenak, supra note 34, at 1021-22.
135. See Alstott, supra note 31, at 2009; supra notes 13-15 and accompanying text.
136. See sources cited supra note 19.
137. This benefit often comes at a cost. The stay-at-home parent is not compensated for his or her work and often reenters the workforce at a lower salary. See infra Part I.C.4.
138. This result seems intolerable considering that a sizeable percentage of married couples earn two incomes. See sources cited supra note 11. Although many families have two earners, the tax code's impact on the decision to work should not be overlooked. The Reagan-administration tax reforms significantly, though inadvertently, benefited the secondary earner and probably caused many women to reenter the workforce. See Nada Eissa, Taxation and Labor Supply of Married Women: The Tax Reform Act of 1986 as a Natural Experiment (NBER Working Paper Series, Working Paper No. 5023, 1995), available at http://www.nber.org/papers/w5023.
139. See sources cited supra note 17.
140. See sources cited supra note 17.
141. See Alstott, supra note 31, at 2009; sources cited supra note 17.
142. See infra Part II.A.
143. MCCAFFERY, supra note 2, at 19.
144. See infra Part II.A.
145. CONG. BUDGET OFFICE, supra note 37, at 1.
146. This is because the secondary earner is still taxed on the margins, even if the family ultimately gets a marriage bonus. See, e.g., Zelenak, supra note 34, at 1021-22 (comparing marriage bonus to the stacking effect).
147. The married spouses must use a marital tax bracket when they file, and they only get one bracket. See I.R.C. § 1 (West 2007); supra Part I.A. If they file separately, they only get half the marital bracket instead of the full single bracket. See supra Part I.B.2.
148. See, e.g., Zelenak, supra note 34, at 1021-22 (comparing the marriage bonus to the stacking effect).
149. Id. (explaining McCaffery's view of the stacking effect).
150. The husband's share of the tax liability would be $8,198. This result accounts for the fact that only one salary falls into the lower rate brackets, bumping the other salary into higher rate brackets. See Rev. Proc. 2007-66, 2007-45 I.R.B. 970, 971-72 (2008 Rate Tables). This calculation is simplified; it is based on taxable income and assumes that all deductions, credits, and other nuances have been accounted for.
151. The wife contributes 45 percent of the couple's total taxable income of $110,000 while she pays 59 percent of the couple's tax liability, according to secondary-earner theory. See I.R.C. § 1; MCCAFFERY, supra note 2, at 23-25.
152. This result worsens when considering the pay gap women already face. See, e.g., Kyles, supra note 18; see also Heather Boushey, Op-Ed., Narrowing the Pay Gap, BOSTON GLOBE, Apr. 20, 2004, at A15. (proposing that women get a tax credit for the wage gap). Notice that a couple with only one working spouse earning $110,000 would owe the same taxes, but there is no secondary earner because one spouse earns the entire income. In that case, a couple pays less tax than a single person earning the same amount. See I.R.C. § 1. While many justify the income split on the basis of marital income pooling, there is no logical reason to limit this to just married couples when many other groups also benefit from resource pooling. See Motro, supra note 3 (arguing that the income-splitting benefit should be expanded to all couples that share their income, regardless of marital status). Other commentators, however, have argued that the marital tax bill should not be divided; it should be viewed as a whole. See, e.g., MCCAFFERY, supra note 2, at 23-24 (discussing McIntyre's view, among others).
153. See sources cited supra note 19 (statistics on stay-at-home parents).
154. See sources cited supra note 19; McCaffery, supra note 7, at 985 (noting that women's entrance into the workplace seems "largely to have added extra workplace responsibilities to the wife's burdens, while holding most of the husband's activities and the wife's nonmarket production constant"). But see Mick Cunningham, Influences of Women's Employment on the Gendered Division of Household Labor over the Life Course: Evidence from a 31-Year Panel Study, 28 J. FAM. ISSUES 422 (2007) (finding that the division of household labor is becoming more equal).
155. For example, picture a couple with two children. If the husband makes $100,000 a year and the wife makes $20,000, the couple will probably view the child-care expenses as coming from the wife's salary because her job earns less money. If the child-care expenses are too expensive for the family, it is clearly the wife who will quit her job to take care of the children. So her salary is the one "burdened" with the child-care expenses.
156. See Jennifer Medina, Stay-at-Home Fathers Face Isolation and a Lingering Stigma, N.Y. TIMES, Dec. 22, 2004, at B1 (reporting that stay-at-home fathers are still in the minority);
157. Lindsey Tanner, No Longer Just Mom's Turf; Dads Help With Kids' Health Care, CHI. TRIB., Feb. 2, 2005 (reporting that fathers are increasing their parental involvement). However, as fathers increasingly consider becoming stay-at-home parents, the issues of the secondary earner will apply to them as well.
158. See supra note 19 (citing statistics).
159. See generally McCaffery, supra note 7, at 984, 1020-25.
160. Id. at 1005-11. Examples of mixed business-personal use items would be home computers, cell phones, home-office supplies, etc. See I.R.C. § 212 (West 2007) (allowing deduction for expenses incurred to produce income). The code, however, does provide for a child-care credit. See infra Part II.C.2.
161. See generally McCaffery, supra note 7 at 1020-25.
162. After paying their taxes and child-care bills, many taxpayers are left with surprisingly little take-home pay. See MCCAFFERY, supra note 2, 145-50.
163. See Karen C. Burke & Grayson M.P. McCouch, Women, Fairness, and Social Security, 82 IOWA L. REV. 1209, 1217 (1997); cf. Staudt, supra note 21 (suggesting that Social Security account for housework).
164. See McCaffery, supra note 7, at 996-1001 (noting that Social Security taxes come close to matching the government revenues from the income tax).
165. Id.
166. Id.
167. Id. (noting that the law works well for widows but becomes more complicated for divorced or remarried women because the rules change for such individuals).
168. Id.
169. The benefits formula is complicated, and the secondary earner's average salary and time spent in the workforce will determine the amount of his or her Social Security benefits. Id.
170. Id.
171. This is because, whether or not he or she worked, the secondary earner may always elect the spouse's benefit. Id.
172. See, e.g., SocialSecurity.gov, Frequently Asked Retirement Questions, http://www.socialsecurity.gov/planners/faqs.htm (last visited Mar. 3, 2008) (explaining that the calculation is based on all covered earnings for years spent in the workforce).
173. See sources cited supra note 19.
174. See Staudt, supra note 21, at 1576 n. 18.
175. See supra Part II.C.1.
176. See Staudt, supra note 21, at 1576.
177. Professor Zelenak points out that, in most cases, secondary earners can still make money, albeit in surprisingly small amounts. Zelenak, Tax and the Married Woman, supra note 34, at 1026.
178. Because imputed income is not taxed, taxpayers may prefer to clean their own home or take care of their own children rather than pay someone else to do so. See Staudt, supra note 21, at 1576.
179. For example, a woman who earns taxable income of $40,000 while her husband earns $70,000 in taxable income actually takes home approximately $30,000. See Rev. Proc. 2007-66, 2007-45 I.R.B. 970, 971-72 (2008 Rate Tables). If she spends $1,000 a month on child care, her taxable income is reduced to $18,000. Other work-related expenses, such as clothes and meals, might further reduce this amount so that working outside the home is not an attractive economic option. See McCaffery, supra note 7, at 984, 1020-25.
180. See MCCAFFERY, supra note 2, at 196, 250-51. A number of factors could upset this economic balance. For example, the couple could divorce or the primary earner could become unable to work or unemployed. See also Meghan O'Rourke, A Working Girl Can Win, SLATE, June 26, 2006, http://www.slate.com/id/2144505;
181. M.P. Dunleavey, Cost of Being a Stay-at-Home Mom: $1 Million, http://articles.moneycentral.msn.com/CollegeAndFamily/RaiseKids/ CostOfBeingAStayAtHomeMom.aspx (last visited Mar. 3, 2008).
182. See Joel S. Hollingsworth, Save the Cleavers: Taxation of the Traditional Family, 13 REGENT U. L. REV. 29 (2001-2002). Hollingsworth argues that the traditional family should face a lower tax burden and that mothers should not be encouraged to work. See id. This, however, ignores current demographics, as most families have two incomes and the joint return imposes tax burdens on these families. See sources cited supra note 11 (showing that dual-income families are a reality and are often necessary).
183. See MCCAFFERY, supra note 2, at 196, 250-51.
184. See Motro, supra note 3, at 1515.
185. See id.
186. See id.
187. See Kornhauser, supra note 31, at 84.
188. For example, to reduce the use of plastic grocery bags, Ireland imposed a $0.33 tax per bag. After the tax took effect, "nearly everyone . . . bought reusable cloth bags," and "plastic bag use dropped 94 percent." Elisabeth Rosenthal, With Irish Tax, Plastic Bags Go the Way of the Snakes, N.Y. TIMES, Feb. 2, 2008, at 3A.
189. President George W. Bush, Inaugural Address (Jan. 20, 2001), available at http://www.whitehouse.gov/news/inaugural-address.html ("[W]e will reduce taxes, to recover the momentum of our economy and reward the effort and enterprise of working Americans.").
190. See supra note 35.
191. See infra Part II.A-C.
192. See infra Part II.A.
193. See infra Part II.C.
194. See infra Part II.B.
195. See infra Part III.
196. See infra Part IV.
197. See Economic Growth and Tax Relief Reconciliation Act of 2001, Pub. L. No. 107-16, § 101(a), 115 Stat. 38, 41 (amending section 1(i)(1) of the Internal Revenue Code). The 10 percent rate bracket went into retroactive effect for 2000, generating the 2001 tax-rebate checks promised by the Bush administration. See id.; Karen Masterson, Tax Cut Bill Given Final Approval, Congress Delivers Big Victory to Bush, HOUST. CHRON., May 27, 2001, at A1.
198. The highest tax rate fell from 39.6 percent to 35.0 percent. Before the 2001 Act, the tax rate brackets were 15.0 percent, 28.0 percent, 31.0 percent, 36.0 percent, and 39.6 percent. See I.R.C. § 1 (West 2000). After the act, the rate brackets were 10 percent (new bracket), 15 percent, 25 percent, 28 percent, 33 percent, and 35 percent. See Economic Growth and Tax Relief Reconciliation Act § 101(a) (amending section 1(i)(1) of the Internal Revenue Code). Thus, the 2001 Act reduced the rates for all brackets above the 15 percent bracket and added a new bracket that reduced the rate on income that used to fall into the 15 percent bracket. The 2001 Act created a gradual phase in of the reductions from 2001 to 2006. Id. However, the Jobs and Growth Tax Relief Reconciliation Act of 2003 accelerated the reductions to 2003. Pub. L. No. 108-27, 117 Stat. 752. Most provisions in these acts are set to sunset in 2011 (specifically, December 31, 2010). See sources cited supra note 35 (various sunset provisions within tax bills).
199. Edmund L. Andrews, Tax Cuts Offer Most for Very Rich, Study Finds, N.Y. TIMES, Jan. 8, 2007, at A16.
200. For a discussion on the stacking effect and how it results in taxing women at the margins, see supra Part I.C.1.
201. Eissa, supra note 124; see also supra Part I.C.1 (stating why the secondary earner is usually a woman).
202. Tax Reform Act of 1986, Pub. Law. No. 99-514, 100 Stat. 2085 (amending scattered sections of the tax code).
203. See Eissa supra note 124, at 5.
204. This is what Professor McCaffery suggests. MCCAFFERY, supra note 2, at 182-83; see also id. at 170-83 (discussing the elasticities of labor participation for women).
205. Since the Bush-administration reforms were not as dramatic as the Reagan-administration reforms, the effects may be slighter. It is also hard to gauge the effect of marginal rates when most secondary earners probably consider many factors before leaving their job for work in the home.
206. See CONG. BUDGET OFFICE, THE EFFECT OF TAX CHANGES ON LABOR SUPPLY IN CBO'S MICROSIMULATION TAX MODEL 6, 16 (2007), available at http://cbo.gov/ftpdocs/79xx/doc7996/04-12- laborsupply.pdf.
207. But see JOINT COMM. ON FIN., OVERVIEW OF PRESENT LAW AND ECONOMIC ANALYSIS RELATING TO MARGINAL TAX RATES AND THE PRESIDENT'S INCOME TAX RATE PROPOSALS (2001), available at http://www.house.gov/jct/x-6-01. pdf ("There is disagreement among economists on the extent to which labor supply decisions are affected by the effective marginal tax rate. . . . [T]here may be more effect on an individual currently not in the labor force than on an individual already in the labor force." (citing Professors Triest and Eissa)).
208. For a good discussion of labor elasticity for women, see Cicconi, supra note 31, at 260-64 (noting that female labor supply rose sharply from 1950 to 1990, reaching a peak in 1999); see also James J. Heckman, What Has Been Learned about Labor Supply in the Past Twenty Years?, AM. ECON. REV., MAY 1993, at 116, 117 (stating that the female labor supply is more elastic);
209. Alberto Alesina et al., Gender Based Taxation and the Division of Family Chores (Harvard Inst. of Econ. Res., Discussion Paper No. 2145, 2007), available at http://ssrn.com/abstract=1033020 (same).
210. JOINT ECON. COMM., 105TH CONG., REDUCING MARRIAGE TAXES: ISSUES AND PROPOSALS 5-6 (Comm. Print 1998) (discussing labor supply of secondary earners), available at http://www.house.gov/jec/fiscal/tx- grwth/marriage/marriage.pdf.
211. Note, however, that Professor Eissa studied the highest income group and that the Reagan-administration reforms lowered the highest marginal rate more significantly than the Bush-administration tax cuts did. See Eissa, supra note 124; Economic Growth and Tax Relief Reconciliation Act of 2001, Pub. L. No. 107-16, 115 Stat. 38; Tax Reform Act of 1986, Pub. Law. No. 99-514, § 101, 100 Stat. 2085, 2096 (lowering rates); TruthAndPolitics.org, Top US Marginal Income Tax Rates, 1913-2003, http://www.truthandpolitics.org/ top-rates.php (last visited Feb. 27, 2008).
212. See supra Part I.C.
213. The 2001 Act called for a gradual phase in of the increase in the 15 percent bracket beginning in 2005. Economic Growth and Tax Relief Reconciliation Act § 302(a). However, the Jobs and Growth Tax Relief Reconciliation Act of 2003 accelerated this relief for 2003 and 2004. Pub. L. No. 108-27, 117 Stat. 752. The Working Families Tax Relief Act of 2004 extended this acceleration from 2005 to 2007, eliminating the marriage penalty in this bracket until the tax cuts expire in 2011. Pub. L. No. 108-311, § 101, 118 Stat. 1166, 1167-68.
214. Economic Growth and Tax Relief Reconciliation Act § 101(a).
215. The marriage penalty for these couples is still reduced, however, because more of their income falls into the lower 10 and 15 percent brackets before reaching the brackets with marriage penalties. See I.R.C § 1 (2001); Rev. Proc. 2007-66, 2007-45 I.R.B. 970, 971-72 (2008 Rate Tables).
216. CONG. BUDGET OFFICE, supra note 37, at 51.
217. Id.
218. Id.
219. I.R.C. § 63 (2000).
220. Economic Growth and Tax Relief Reconciliation Act § 301(b). The act substituted an "applicable percentage" rather than a deduction amount, so that the deduction gradually increases from 2005 to 2009 until the joint deduction is 200 percent of the single's deduction. Id.
221. See Treas. Reg. § 1.151-1 (2001).
222. See CONG. BUDGET OFFICE, supra note 37, at 51.
223. Economic Growth and Tax Relief Reconciliation Act § 303(a)-(b) (amending section 32 of the Internal Revenue Code).
224. See supra Part I.B.3.
225. I.R.C. § 32 (West 2001). Taxpayers with a modified adjusted gross income below the phaseout amount received the full credit, while taxpayers with incomes above the phaseout amount will have a reduced credit until the credit completely phases out. In 2006, the credit completely phases out at $36,348 for a married taxpayer with two children. See id. (as adjusted for inflation).
226. Economic Growth and Tax Relief Reconciliation Act § 303(a). The phaseout is increased yearly by $1,000 from 2002 to 2004, by $2,000 from 2005 to 2007, and $3,000 in the years after 2007. See id.
227. See supra Part II.B.3.
228. Economic Growth and Tax Relief Reconciliation Act § 303(a)(2) (amending section 32(j)(1)(B)(ii) of the Internal Revenue Code). Note that only the $3,000 increase is tied to inflation, while the interim $1,000 and $2,000 increases do not change with inflation. Id. Thus, taxpayers will not realize the full benefits of this provision until 2009.
229. See MCCAFFERY, supra note 2, at 205. Since a family can claim the child tax credit whether or not both spouses work, the credit does not provide an incentive for the secondary earner to participate in the workforce. Id.
230. See supra Part I.C.2.
231. See infra Part II.C.1-3.
232. I.R.C. § 24 (West 1998).
233. Economic Growth and Tax Relief Reconciliation Act § 201(a) (amending section 24 of the Internal Revenue Code). The 2001 Act immediately increased the child tax credit from $500 to $600 and planned gradual increases to reach a credit of $1,000 by 2010. Id. However, the Jobs and Growth Tax Relief Reconciliation Act of 2003 accelerated the credit so that qualifying families could claim the $1,000 credit in 2003 and 2004. Pub. L. 108-27, § 101(a), 117 Stat. 752, 753 (amending section 24 of the Internal Revenue Code). The Working Families Tax Relief Act of 2004 similarly allowed the $1,000 credit for 2005 and beyond. Pub. L. 108-311, § 101(a), 118 Stat. 1166, 1167 (amending section 24 of the Internal Revenue Code).
234. Economic Growth and Tax Relief Reconciliation Act § 201(b)-(c) (amending section 24(d) of the Internal Revenue Code). Prior to 2001, the credit was generally nonrefundable. See I.R.C. § 24 (West 2000). The 2001 Act allowed the credit to be refundable to all taxpayers. See Economic Growth and Tax Relief Reconciliation Act § 201(b)-(c) (amending section 24 of the Internal Revenue Code).
235. From 2001 to 2003, this amount was set at 10 percent of the taxpayer's earned income in excess of $10,000 (the "child-tax-income figure"). IRC § 24(d) (West 2001). In 2005 and beyond (until the provisions of the 2001 Act sunset), the amount allowed is 15 percent of the taxpayer's earned income in excess of the child-tax-income figure. I.R.C. § 24(d) (West 2004). However, under section 1 of the Internal Revenue Code, the child-tax-income figure is tied to inflation. For the 2007 inflation-adjusted amount, see Rev. Proc. 2007-66, 2007-45 I.R.B. 970, 973. See also ANDREW LEE & ROBERT GREENSTEIN, HOW THE NEW TAX LAW ALTERS THE CHILD TAX CREDIT AND HOW LOW-INCOME FAMILIES ARE AFFECTED (2003) (discussing the impact of recent tax changes on the child tax credit), available at http://www.cbpp.org/5-28-03tax3.pdf.
236. H.R. REP. NO. 107-84, at 8-10 (2001). The committee noted that many taxpayers do not currently get the benefit of the credit. Id. at 131-33.
237. See MCCAFFERY, supra note 2, at 205.
238. I.R.C. § 24 (West 2001) (child-care arrangements do not affect the credit).
239. The help to families may also be short-lived, however, as the Bush-administration tax cuts sunset in 2011. Economic Growth and Tax Relief Reconciliation Act § 901(a). Additionally, even if the $1,000 credit is extended, the credit is not adjusted for inflation and thus will lose its value over time. See I.R.C. § 24 (West 2000). More secondary earners are affected by the phaseout of the credit than they are by the refundability of the credit. CONG. BUDGET OFFICE, supra note 192, at 13.
240. See supra Part I.C.2.
241. See supra Part II.C; cf. Hollingsworth, supra note 166, at 53, 62 (arguing that the child-care credit "injures the traditional family" and that it should only be offered to dual-earning families that have financial need).
242. See I.R.C. § 21 (West 2000). Before 2001, section 21 of the code allowed a maximum credit of 30 percent of child-care expenses, not to exceed $2,400 for one child or $4,800 for two or more children. Id. The 30 percent credit began to phase out when adjusted gross income exceeded $10,000, but the credit could not be decreased below 20 percent no matter how high the taxpayer's income went. Id. Thus, a taxpayer with one qualifying child and the maximum amount of child-care expenses would get a credit between $480 and $720, depending on the taxpayer's income. For a taxpayer with two children and maximum expenses, the credit would be between $960 and $1,440, depending on the taxpayer's income. See id. Note that a deduction under section 21 may apply to other qualifying individuals besides children, such as handicapped dependants and spouses unable to take care of themselves. Id.
243. Id.
244. Id.
245. The phaseout began at $15,000 instead of $10,000. Economic Growth and Tax Relief Reconciliation Act of 2001, Pub. L. No. 107-16, § 204(b), 115 Stat. 38, 49 (amending section 21 of the Internal Revenue Code).
246. See id. § 204.
247. Id. § 204(a). The allowed expenses increased from $2,400 to $3,000 for one child and from $4,800 to $6,000 for two or more children. Id.
248. See supra Part II.A.
249. See supra Part II.B.
250. See supra Part II.C.
251. See supra Part II.B.
252. This is true unless the couple's entire income falls within the 10 and 15 percent brackets, which minimize marriage penalties. See supra notes 195-96 and accompanying text. For a discussion regarding how the joint return affects the secondary earner and an explanation of the stacking effect, see supra Part I.C.
253. See Edmund L. Andrews, Tax Cuts, N.Y. TIMES, Mar. 5, 2006, at 3; Douglas Holtz-Eakin, Editorial, Out on a Limb; Look Out! Here Comes Yet Another Unrealistic Budget, WASH. POST, Feb. 5, 2006, at B1.
254. See Zelenak, supra note 34, at 1024.
255. U.S. CONST. amend. XVI; TruthAndPolitics.org, supra note 193.
256. See supra Parts I.C, II.A.
257. See Janice Revell, What's Next, MONEY, Mar. 1, 2008, at 84, 88.
258. The marginal rates used to be much higher. TruthAndPolitics.org, supra note 193.
259. See OFFICE OF MGMT. & BUDGET, BUDGET OF THE UNITED STATES GOVERNMENT, FISCAL YEAR 2009, THE NATION'S FISCAL OUTLOOK 18-20 (2008), available at http://www.gpoaccess.gov/usbudget/fy09/pdf/budget/outlook.pdf; Martin Crutsinger, CBO Projects $1.76 Trillion in Deficits over Decade, CHI. TRIB., Aug. 18, 2006, at C5.
260. See DEP'T OF TREAS., 2007 FINANCIAL REPORT OF THE UNITED STATES GOVERNMENT, 118, 123-28 (2007), available at http://fms.treas.gov/fr/07frusg/07frusg.pdf (showing that the costs of Social Security and Medicare are skyrocketing); OFFICE OF MGMT. & BUDGET, supra note 241.
261. The deficits must be financed eventually and could be offset by any measure that raises revenue or reduces spending. See William G. Gale & Peter B. Orszag, An Economic Assessment of Tax Policy in the Bush Administration, 2001-2004, 45 B.C. L. REV. 1157, 1193 (2004) ("[A]ny permanent tax cut must be financed by some combination of future spending cuts or future tax increases.").
262. Allen Schick, "A Surplus, If We Can Keep It," BROOKINGS REV., Winter 2000, at 36, 39 (noting that the marginal rate increase "pumped up" federal revenues);
263. Cragg Hines, Clinton Will Target Trims in Deficit, Jobs Creation, HOUST. CHRON., Feb. 14, 1993, at A1 (outlining the Clinton-administration plan to decrease the deficit with an inevitable tax increase).
264. See CBPP Says Budget Outiook "Grimmer" Than CBO Projections Suggest, 2004 TAX NOTES, Jan. 29, 2004. The deficit projections worsen if the Bush-administration tax cuts are extended past 2011. Id. Critics have complained that the sunset provisions hide the true costs of the tax cuts since allowing the tax cuts to sunset in 2011 will be politically risky. Id.
265. Raising the marginal rates was one strategy that the Clinton administration used to cut the deficit. See Hines, supra note 244, at A1.
266. See supra notes 185-89 and accompanying text.
267. See supra Part II.B.3
268. See supra Part II.B.3.
269. The tax benefits of imputed income can surprisingly make it cheaper for low-income taxpayers to live on one income instead of two. See MCCAFFERY, supra note 2, at 145-50.
270. See Peter G. Gosselin, President Bush's Budget Plan; A Bid for Permanent Tax Cuts, L.A. TIMES, Feb. 8, 2005, at A18.
271. See supra notes 241-42 and accompanying text.
272. See supra note 35 (listing numerous tax acts passed during the Bush administration).
273. See Edward J. McCaffery, The Missing Links in Tax Reform, 2 CHAP. L. REV. 233, 233-36 (1999).
274. Fundamental reforms require broad political support, making them politically difficult to achieve. See, e.g., Zelenak, supra note 34, at 1046-47 (analyzing McCaffery's proposals against political realities); Zelenak, Critical Tax Theory, supra note 31 (criticizing some proposed reforms as being unrealistic).
275. Critics charge that the 2011 sunset provision hides the true cost of the recent tax reforms. See supra note 245.
276. See, e.g., supra note 221 (noting that the child-care credit is not tied to inflation).
277. See JOINT ECON. COMM., supra note 192 (discussing various reforms).
278. See infra Part I.C.2. The number of children living with unmarried couples is increasing. See U.S. CENSUS BUREAU, supra note 19, at 16-18.
279. Same-sex couples may not file a joint return.
280. See, e.g., Dorothy A. Brown, Race, Class, and Gender Essentialism in Tax Literature: The Joint Return, 54 WASH. & LEE L. REV. 1469, 1501-04 (1997) (finding that blacks are disproportionately affected by the stacking effect);
281. Beverly I. Moran & William Whitford, A Black Critique of the Internal Revenue Code, 1996 WIS. L. REV. 751, 791-800 (finding that black couples are less likely to get a marital bonus through joint filing).
282. Several commentators have proposed an elimination of the joint return. See sources cited supra note 31.
283. In addition to the concerns discussed in Section IV.A, Congress would also have to consider the lost revenues from eliminating the marriage penalty as well as how to divide deductions and credits that might be claimed by both spouses on two separate returns. See CONG. BUDGET OFFICE, supra note 37, at 54-55.
284. Professor Zelenak criticizes the joint return for taking sides in the marriage debate by rewarding traditional one-earner families and punishing families where both spouses work. Zelenak, supra note 34, at 1033-34. However, the opposite result is reached when the joint return is eliminated. Professor Alstott points out that a switch to individual filing burdens caregivers that work in the home. Alstott, supra note 31, at 2014-16; see also CONG. BUDGET OFFICE, supra note 37, at 54 (noting that instituting separate filing "could be considered antifamily" because it could influence parents to leave their children in daycare). But see Zelenak, supra note 72, at 3 n. 11 ("I previously wrote in support of mandatory separate filing, and I believe it is a serious political possibility in the longer run.").
285. Because all of their income would be on one tax return, traditional families would only use the tax brackets once. Dual-earning couples would file two tax returns and thus would receive more benefits from the progressive rate brackets. See I.R.C. § 1 (West 2007) (ignoring marital brackets because only single filers are allowed for purposes of this example). For example, a couple with two earners and $100,000 of total taxable income evenly divided between them would pay less tax than a family with only one earner making the same amount. See id. (again ignoring marital brackets). The dual earners each file a return with $50,000, and the family with a single earner files one return with $100,000 and pays more tax.
286. Zelenak, supra note 72, at 18.
287. Perhaps for this reason, some have suggested a compromise that would allow taxpayers to choose the most beneficial filing status. Id. at 12. However, this would just be another piecemeal change to the tax code that would not completely correct the underlying bias. See id.
288. Id. at 6-7. To keep complete neutrality in this respect, the tax code would always have to consider marital status. Id.
289. Id. at 4.
290. For example, a couple that takes home $100,000 via two incomes of $50,000 will pay different taxes than a couple in which one spouse earns $75,000 and the other earns $25,000.
291. While beyond the scope of this Comment, Congress also retains enormous flexibility to enact credits, deductions, and penalties that would affect the tax bill. For example, Congress could enact a "stay-at-home-spouse" credit or deduction, which would reduce taxes for traditional families with one income. See, e.g., JOINT ECON. COMM., supra note 192 (discussing reforms).
292. MCCAFFERY, supra note 2, at 58. The joint return was instituted in 1948 initially to equalize tax filing between states with different community-property laws. See supra note 7 and accompanying text. Later on, the joint return was justified by income pooling. See Zelenak, supra note 72, at 3 (noting that the elimination of the joint return was politically unpopular).
293. MCCAFFERY, supra note 2, at 58.
294. CONG. BUDGET OFFICE, supra note 37, at 28.
295. Of course, this analogy assumes that the justification for couples neutrality should also apply to other unmarried couples who presumably also share income. See Motro, supra note 3.
296. See id. at 1543.
297. Id. at 1543-44; cf. Kornhauser, supra note 31, at 104 (noting that many married taxpayers do not, in fact, pool income).
298. Motro, supra note 3, at 1543-44. Professor Motro notes that her proposal is aligned with the views of many Americans on marriage, including President Bush, who supports civil unions. Id. at 1515 n.11. Motro cites an interview of Bush in which he confirms his support for civil unions, stating, "I view the definition of marriage different from legal arrangements that enable people to have rights." Id. Professor McCaffery notes, "The tax law refuses to consider that some couples who are not married may pool their incomes, possibly even more fairly than many married couples do." McCaffery, supra note 2, at 63. This results in unfair tax treatment and the innocent-spouse problem. Id. ("A wife cannot sue her husband to get one-half of the family's economic pool on the grounds that the tax laws say she owns it.").
299. See DONALDSON, supra note 102, at 10-13. The tax code taxes higher incomes at higher rates, which makes it progressive. Id. This concept is often referred to as vertical equity because it puts more taxes on those with a greater ability to pay them. See Nancy C. Staudt, The Hidden Costs of the Progressivity Debate, 50 VAND. L. REV. 919, 933-36 (1997).
300. This concept is known as horizontal equity. See Staudt, supra note 279, at 925-32.
301. Motro, supra note 3, at 1543. This in itself is an improvement over the joint-return system, which sometimes causes tax liability for taxpayers that never had a legal right to the income. Id. at 1532-33.
302. Of course, while Congress could choose to make joint filing separate or mandatory for these different groups, in reality most taxpayers would have a choice. To share or not share legal entitlement to income, taxpayers could enter into many different types of contractual arrangements. See, e.g., Lucas v. Earl, 281 U.S. 111 (1930) (holding that a California couple attempted to assign their income by contract).
303. See supra Part IV.B.
304. Recall that the current categories are "Married individuals filing joint returns and surviving spouses," "Heads of households," "Unmarried individuals," and "Married individuals filing separate returns." I.R.C. § 1 (West 2007). Married taxpayers are limited to the married category, while singles may choose to file as heads of households if they meet the requirements. Id. §§ 1, 2(b).
305. Recall that a married person now only has two filing options: a joint-married return or a separate-married return. Married persons are thus excluded from the tax brackets for single persons. See id. § 1. This proposal would add a third option.
306. Cf. Bruce Bartlett, The Marriage Penalty: Origins, Effects, and Solutions, 80 TAX NOTES 1341, 1347 (1998). Bartlett proposes that Congress provide taxpayers with a choice between filing under the marital brackets or the single brackets. Id. This, of course, could significantly impact revenues. See id. at 1347-48.
307. Cf. also Boris I. Bittker, Federal Income Taxation and the Family, 27 STAN. L. REV. 1389, 1431-44 (1975) (opposing reforms that encourage "bedchamber" transactions).
308. For example, Congress could collect the same amount of revenue by decreasing the tax brackets for married couples, so that traditional families receive a smaller bonus, or decreasing the tax brackets for single taxpayers. While this might appear as "raising taxes" on one group, it is really just an example of how Congress must continually balance competing interests when it comes to tax policy. For example, when the 2001 Act added the new 10 percent bracket, Congress balanced competing interests when setting the income levels for this bracket. See supra Part II.B.
309. See, e.g., supra note 261 and accompanying text.
310. See Bartlett, supra note 286, at 1347 ("Indeed, growth of the marriage penalty is as much due to demographic changes as changes in the tax law.").