NY Sun Editorial: Obama’s War on Women (Tax Edition)

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 tax 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 penalty 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 deductions (18% of AGI) would be in the 28 percent marginal tax bracket 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 rate, that is reasonable if one assumes a typical state individual income tax rate for high-income earners combined with Obama’s proposed 39.6 percent rate on wage income plus possibly 4 percent payroll tax 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).