Eliminate the marriage penalty
Donald Trump
"This new tax code eliminates the marriage penalty and the Alternative Minimum Tax (AMT) while providing the lowest tax rate since before World War II."
Trump-O-Meter
Compromise
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As a presidential candidate, Donald Trump pledged to provide relief to married couples hurt by the tax code.
On Dec. 19 and 20, the Senate and the House passed the final version of the tax bill, which will go to the president for his signature.
So how did this bill treat the marriage penalty? It didn't eliminate it entirely, but it did lessen its reach.
Promise: The tax bill "eliminates the marriage penalty"
A "marriage penalty" occurs when two individuals end up paying more when they are married then they would have if they had both been single. This quirk stems from having different tax brackets for individual filers and married couples.
There is no marriage penalty if the individual income cutoffs for a given tax rate are twice as high for a married couple. A marriage penalty comes into play when the cutoffs for a married couple are less than twice the individual cutoff.
Prior to passage of the bill, for instance, the two lowest tax brackets -- 10 percent and 15 percent tax brackets -- do not face any penalty. That covers incomes up to $37,950. The penalty starts to phase in for those in the 25 percent tax bracket, which covers those earning between $37,950 and $91,900 (individuals) or $75,900 and $153,000 (married couples).
Above that, every tax bracket has a marriage penalty under current law. Here are the tax brackets prior to passage of the new bill:
The new bill eases that situation. Under the new brackets, the marriage penalty only phases in with the second-highest tax bracket -- the 35 percent bracket, which is for earners between $200,000 and $500,000 (individual) and $400,000 and $600,000 (married couples).
Here are the new brackets:
In other words, while the tax bill didn't eliminate the marriage penalty, many fewer taxpayers would face it for regular taxable income.
Meanwhile, there are other, less obvious marriage penalties, and the bill addresses some of those as well, said Joseph Rosenberg, senior research associate at the Urban Institute-Brookings Institution Tax Policy Center.
For instance, Rosenberg said, under prior law, the child credit was phased out at $75,000 for individuals and $110 for married couples. Under the new bill, the cutoffs are at $200,000 and $400,000.
The tax bill has gone a long way toward curbing the marriage penalty, but it didn't eliminate it, as Trump had pledged. We rate it a Compromise.
PolitiFact, "What's in the final version of the tax bill?" Dec. 18, 2017
PolitiFact, "Who wins and who loses from the tax bill?" Dec. 19, 2017
Joint Committee on Taxation, "Distributional Effects Of The Conference Agreement For H.R.1, The Tax Cuts And Jobs Act," Dec. 18, 2017
Urban Institute-Brookings Institution Tax Policy Center, "Analysis of the Tax Cuts and Jobs Act," accessed Dec. 20, 2017
Urban Institute-Brookings Institution Tax Policy Center, "Historical Highest Marginal Income Tax Rates," accessed Dec. 21, 2017
Email interview with Patrick Newton, spokesman for the Committee for a Responsible Federal Budget, Dec. 19, 2017
Interview with Joseph Rosenberg, senior research associate at the Urban Institute-Brookings Institution Tax Policy Center, Dec. 21, 2017
Donald Trump promised during his presidential campaign to help the working class by eliminating a feature of the tax code that charges some married couples at a higher rate than if they were to file taxes individually.
Because married couples are taxed differently than single individuals, payments can result in either a penalty or a bonus. When both people in a marriage make similar incomes, the combined incomes can push the couple into a higher tax bracket in which they pay more.
Couples earning higher incomes tend to be more likely to receive penalties than bonuses. The majority of Americans receive marriage bonuses.
To eliminate the penalty, Trump — in his campaign's tax plan — proposed making the taxable income of an individual filer exactly half of that of a married couple. In other words, a single person making between $50,001 and $150,000 would be taxed at the same rate as a couple filing jointly with a combined income of between $100,001 and $300,000.
The Trump administration's 2017 tax framework, which was released on Sept. 27, calls for eliminating instances in which married couples receive fewer benefits than if they were to file separately. If included in the final tax legislation and passed into law, the standard deduction for married and single taxpayers would amount to $24,000 and $12,000, respectively. It also proposed eliminating the marriage penalty in the Child Tax Credit.
However, the framework does not spell out how it would eliminate the marriage penalty from taxable income rates, as Trump's campaign tax plan had done.
We'll wait to see if Trump's initial tax promise makes it into the final legislation. For now, we'll rate this In the Works.
Congressional Budget Office, "For Better or Worse: Marriage and the Federal Income tax," June 1997
Donald Trump presidential campaign, "The Goals of Donald Trump's Tax Plan," accessed Oct. 5, 2017
U.S. Treasury Department, 2017 tax code framework, Sept. 27, 2017