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Maryland’s Tax Code Shouldn’t Penalize Marriage

3 min readBy: Jared Walczak

Written Testimony for the Maryland House
Ways and Means CommitteeThe Committee on Ways and Means, more commonly referred to as the House Ways and Means Committee, is one of 29 U.S. House of Representative committees and is the chief tax-writing committee in the U.S. The House Ways and Means Committee has jurisdiction over all bills relating to taxes and other revenue generation, as well as spending programs like Social Security, Medicare, and unemployment insurance, among others. on HB 1277

Chairwoman Kaiser and Members of the Committee:

About 38,000 Maryland couples will tie the knot this year, many of them vowing themselves to each other “for richer, for poorer”— but they might not be aware that the state’s taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. code could make them a little poorer simply because of their nuptials. Because bracket widths for Maryland’s individual income taxAn individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment. Though barely 100 years old, individual income taxes are the largest source of tax revenue in the U.S. are not doubled for joint filers, married filers can wind up paying more than they did, on the same income, while filing separately. Long ago, Maryland used to impose a special tax on bachelors to encourage them to marry; today, the state essentially imposes a surtax on married couples. The time has come for Maryland’s tax code to get out of the marriage business altogether.

In Maryland, married taxpayers may elect to file their taxes on one return (“married filing jointly”) or separately (“married filing separately”). This option, however, does not eliminate the sting of the marriage penaltyA marriage penalty is when a household’s overall tax bill increases due to a couple marrying and filing taxes jointly. A marriage penalty typically occurs when two individuals with similar incomes marry; this is true for both high- and low-income couples. , as the state requires that taxpayers use the same filing status they chose when filing their federal taxes. A couple for whom “married filing jointly” is the best choice at the federal level is required to file the same way in Maryland even if that means paying more in state taxes than if the couple was unmarried or filed separately.

Current Maryland Rates and Brackets
Single Filers Joint Filers
2.00% > $0 2.00% > $0
3.00% > $1,000 3.00% > $1,000
4.00% > $2,000 4.00% > $2,000
4.75% > $3,000 4.75% > $3,000
5.00% > $100,000 5.00% > $150,000
5.25% > $125,000 5.25% > $175,000
5.50% > $150,000 5.50% > $225,000
5.75% > $250,000 5.75% > $300,000

Filing separately can also impact whether and how a couple can claim various other deductions and credits. This is particularly true at the federal level, where the allocation of exemptions, deductions, and credits often makes joint filing the best option even if it entails both a federal and a state marriage penalty.

There is nothing Maryland can do about the federal marriage penalty, but there is also no reason why the state should impose its own. The tax code should be neutral regarding marriage, and certainly should not penalize matrimony.

Statistically, higher earners and small business owners are particularly likely to be married, meaning that marriage penalties have the potential to affect a significant share of pass-through businessA pass-through business is a sole proprietorship, partnership, or S corporation that is not subject to the corporate income tax; instead, this business reports its income on the individual income tax returns of the owners and is taxed at individual income tax rates. es. Twenty-three states and the District of Columbia have marriage penalties built into their brackets, so Maryland is not alone in discriminating against married couples in its tax code. It is, however, treating some filers differently than others for no good reason, and in the process hurting the state’s competitiveness.

House Bill 1277 would double bracket widths for all taxable incomeTaxable income is the amount of income subject to tax, after deductions and exemptions. For both individuals and corporations, taxable income differs from—and is less than—gross income. above $6,000. Ideally the legislation would double bracket widths throughout the entire tax schedule. This means that most married filers would still owe $52.50 more than if they filed separately, before applying any tax preferences. Nevertheless, it remains an important step in the right direction, since under current law, middle-class families could see additional tax burdens running into the hundreds of dollars or more.

Happy families, wrote Tolstoy, are all alike—but at least in Maryland, they are not all taxed alike. Reducing the marriage penalty would be a victory for both competitiveness and fairness.