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Taxes Rising for Affluent Married Couples

Failing to renew the Bush tax cuts in the recent “fiscal cliff” legislation has, as we predicted in December, brought back the Marriage Penalty.

bride-groom A Sun Sentinel report talks to Plantation, FL accountant Sheri Schultz.  Schultz says her family “is facing tax hikes to the tune of thousands of dollars this year.”

They are not alone.  Families with dual higher incomes will owe more in taxes this year. Specifically married couples who earn at least $250k a year will be paying more in taxes, considerable more than their single counterparts.

The “marriage penalty” first appeared in 1969, then most married couples had only one person working, and the tax provision was intended to give a tax cut to one income families. Unfortunately, the tax failed to foresee the amount of women who would enter the workforce. It is common today for most families to have both spouses working, usually because they need to, to make ends meet.

The marriage penalty targets these two-income families for higher taxes. That is because the penalty taxes the income of a family’s second wage earner at a much higher rate than if the salary were taxed only as that of an individual.

But it’s not just the marriage penalty.  Deductions and exemptions for items such as charitable donations, children, and property taxes will be eliminated for married couples making more than $300,000. If you are married and make $450,000, they get you even more. In addition to the other penalties on your income, your tax rate is being raised by nearly about 5% to almost 40%.

According to the Wall Street Journal, a married couple with children making over $300k would pay close to $20k more in taxes as a result of this marriage penalty.  This is money that would otherwise be put back out into the economy by purchasing goods or services or even putting back into their business to perhaps hire more employees.

This seems to be yet another example of unintended consequences of the government’s actions.  I’m starting to believe however that these consequences are not unintended but a planned set of events to make the citizens dependent on the government and divide us into clear classes ending in class warfare.

Do you figure married couples will consider getting divorced to avoid the tax penalty?  I doubt it, there are likely more advantages to staying married, family insurance comes to mind, than getting divorced. It is possible that a couple might forego getting married for those reasons however.

Either way you cut it, we got the tax increases that Obama said we wouldn’t.

A lie coming from Washington, who would have figured?

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