Policy Implications of The Marriage Tax Penalty (Subsidy) For Lower Income Parents

摘要

Expansion of the Earned Income Credit (EIC) and the Child Tax Credit (CTC) has magnified the federal income tax marriage "penalty" for many relatively lower-income households. Our analysis shows that, in some cases, couples face marriage penalties from $2,000 to $4,000 or around 10 percent of earned income. Given the increasing popularity of unmarried cohabitation, the potentially substantial marriage penalties for two-earner households could deter some lower-income couples from marrying. Given the positive benefits marriage provides to children in households, Congress should re-evaluate the EIC and CTC to reduce the marriage penalty and encourage marriage rather than cohabitation.