In an editorial posted on its website, the New York Sun argued that Sen. Barack Obama is waging a “war on women,” partly due to his 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. policies. The paper says the following:
Meanwhile, the most astonishing sentence in the op-ed (referring to Furman/Goolsbee op-ed) is this one: "His plan would not raise any taxes on couples making less than $250,000 a year, nor on any single person with income under $200,000." It amounts to a declaration of war on two-income families, a 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. of punitive proportions. If those two single persons with income just under $200,000 get married, Mr. Obama is going to hammer them with a huge tax increase. If the second earner, who in many cases is the woman, is going to have to give 54% of what she earns to the government, she might as well stay home with the children. Mr. Obama may be able to get away with symbolic slights to women, such as not picking Senator Clinton as vice president. But punishing them with confiscatory taxes for participating in the workforce at a high income level moves the slight into the realm of substance.
The problem with their claim of this being a marriage penalty of punitive proportions is that the tax code at that high-income level already has significant marriage penalties built into it. Obama isn’t changing much as it relates to the tax code “penalizing marriage” by imposing that threshold at this level. For example, a typical single person earning $200,000 in wages with $36,000 in itemized deductionItemized deductions allow individuals to subtract designated expenses from their taxable income and can be claimed in lieu of the standard deduction. Itemized deductions include those for state and local taxes, charitable contributions, and mortgage interest. An estimated 13.7 percent of filers itemized in 2019, most being high-income taxpayers. s (18% of AGI) would be in the 28 percent marginal tax bracketA tax bracket is the range of incomes taxed at given rates, which typically differ depending on filing status. In a progressive individual or corporate income tax system, rates rise as income increases. There are seven federal individual income tax brackets; the federal corporate income tax system is flat. at that level. For a typical married couple earning $250,000 with $45,000 in itemized deductions (assume no children) would be already in the 33 percent bracket. There is already a marriage penalty, possibly of “punitive proportions” depending upon your view.
With regards to the 54 percent marginal tax rateThe marginal tax rate is the amount of additional tax paid for every additional dollar earned as income. The average tax rate is the total tax paid divided by total income earned. A 10 percent marginal tax rate means that 10 cents of every next dollar earned would be taken as tax. , that is reasonable if one assumes a typical state 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. rate for high-income earners combined with Obama’s proposed 39.6 percent rate on wage income plus possibly 4 percent payroll taxA payroll tax is a tax paid on the wages and salaries of employees to finance social insurance programs like Social Security, Medicare, and unemployment insurance. Payroll taxes are social insurance taxes that comprise 24.8 percent of combined federal, state, and local government revenue, the second largest source of that combined tax revenue. increase plus higher marginal rates in phase-out ranges of itemized deductions plus Medicare tax plus state individual income tax.
On the other hand, if one looks at Obama’s payroll tax plan, it implicitly punishes families whose wage income comes from only one source relative to a family whose income comes from two sources. That’s because the payroll tax imposes taxes on individuals, independent of filing status. So under Obama’s payroll tax plan, a family where the primary earner (typically the husband) brings home $480,000 would pay more in payroll taxes than in the family where the husband earns $240,000 and the wife earns $240,000 (who would pay nothing more in payroll taxes under Obama’s plan as I interpret it).Share