Negating the Cost of 'I Do': Ending the United States Tax Code's Family Penalty Through Permissive Joint Filing

Author:Christine D. Allie
Position:Assistant Professor of Law, Delaware Law School.
Pages:499-546
 
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Negating the Cost of “I Do”: Ending the United States
Tax Code’s Family Penalty Through Permissive Joint
Filing
Christine D. Allie*
In June 2016, Republicans in the House of Representatives announced
their vision for a simplified tax code built for economic growth in a 35
page policy paper released as part of a six part series.1 In November 2016,
Republican Donald Trump was elected as the 45th President of the United
States, which, along with the elections of a Republican-controlled House
and Senate, allowed for significant changes to the United States’ tax
structure to become law on December 22, 2017.2 Though Congress purports
to strive for simplicity, support for families, fairness, and progressivity,
these changes fell short of meaningful progress in moving toward these
goals. This Article argues that such fairness and support for families may
only be expressed through a code that eliminates the family tax penalty
created by application of the Head of Households filing status and the
mandated filing status based on marriage. To support the family, the tax
code must end its use of marital status as a measure of economic
circumstances where it penalizes the family.
Copyright 2017, by CHRISTINE D. ALLIE.
* Assistant Professor of Law, Delaware Law School. I am grateful for my
husband, Stuart, and newborn daughter, Clare Rose (July 14, 2016), who have
inspired this paper. Thanks also to the 2017 Junior Tax Workshop participants
and the Honorable Aida Wasserstein for comments on earlier drafts.
1. “A Better Way” is a series of six policy papers on Poverty, National
Security, The Economy, The Constitution, Health Care, and Tax Reform available
at the Speaker of the U.S. House of Representative’s website https://abetterway
.speaker.gov/, which are presented as the GOP’s vision for a confident America,
at home a nd abr oad. See A Better Way, SPE AKER OF THE HOUSE OF
REPRESENTATIVES, https://abetterway.speaker.gov/ (last visited Jan. 13, 2018)
[https://perma.cc/Q443-LZHH]. The introduction of a new tax code has been a
persistent initiative for recent Congresses, with Congressmen regularly citing its
complexity, having grown from 26,000 pages in 1986 to about 70,000 pages today.
2. Donald Trump secured 304 electoral votes to Hilary Clinton’s 227, with
270 elec toral votes needed to win. The 2016 General Election formed a 115th
United States Congress with 52 Republican senato rs, out of 100 total senators,
and 241 Republican Representatives in the U.S. House of Representatives, out of
435 total Representatives, with 218 seats needed for control. FEDERAL ELECTIONS
2016, FED. ELECTION COMMN (Dec. 2017). The changes to the tax structure were
enacted as Pub. L. No. 115-97, 131 Stat. 2054 (2017).
500 LOUISIANA LAW REVIEW [Vol. 78
TABLE OF CONTENTS
Introduction .................................................................................. 501
I. The Individual Income Tax Was Introduced as
Pro-Family and Pro-Marriage ...................................................... 505
A. In the Beginning, There Was Only Tax Filing
Per Individual ........................................................................ 506
B. Introducing Income Splitting to the Tax Code ...................... 509
II. The 1951 and 1969 Purported Horizontal Equity Reforms
to the Code Diluted the Status of the Wife and the Mother ......... 511
A. The 1951 Addition of the Head of Household
Filing Status Introduced the “Family Penalty” ...................... 512
B. The 1969 Amendments Addressed the “Singles Penalty”
by Adding More Complexity to the Code ............................. 515
C. Legal Challenges to the Marriage Penalty
Demonstrate New Attitudes Toward Marriage ...................... 518
D. The Limited Reintroduction of Income Splitting .................. 520
III. The Code’s Aversion to Marriage: A Concrete Discussion
of Congress’s Attack on Marriage................................................ 524
A. Beyond the Brackets: The Family Penalty and
the Earned Income Tax Credit ............................................... 525
B. The Premium Tax Credit’s Impact on the
Family Penalty ....................................................................... 529
C. The Mortgage Interest Deduction’s Marriage
Disincentive ........................................................................... 533
D. Certain Tax Credits and Deductions Further the
Anti-Family Structure of the Tax Code ................................. 535
IV. Permissive Joint Filing Will Allow for Necessary Support
of the Family ................................................................................ 536
A. Defining Permissive Joint Filing ........................................... 536
B. Permissive Joint Filing, the Marriage Bonus,
and a Win for Gender Equality .............................................. 539
C. Permissive Joint Filing is American ...................................... 541
Conclusion .................................................................................... 546
2017] NEGATING THE COST OF “I DO” 501
INTRODUCTION
That ubiquitous and seemingly amiable query of “what do you do?”
when encountering new acquaintances tends to lead to an awkward
moment for many tax practitioners. Upon divulging their field,
accountants and tax attorneys likely are responded to with stiff smiles lined
with a smidge of pity; though, those persons called to the profession know
that they work in a dynamic area of practice that should be met with envy
rather than pity. The study of a nation’s tax system is quite remarkable in
considering that nation’s values—where that system places the burden of
taxation indicates who it believes should contribute financially to the well-
being of the nation. Conversely, when a party receives a tax deduction or
a tax credit3 for certain expenditures or actions, the country is indicating
its support for those expenditures or actions. Through the tax code, the
American citizenry purports to support children, home ownership,
environmentally friendly initiatives, health insurance, and much more.4
3. Tax credits provide a dollar-for-dollar reduction of a taxpayer’s income tax
liability. In other words, a $100 tax credit reduces the taxpayer’s tax liability by
$100. On the other hand, tax deductions reduce a taxpayer’s taxable income and, as
a result, only reduce the taxpayer’s tax liability by an amount equal to the amount
of the tax deduction, multiplied by the taxpayer’s marginal tax rate. Thus, a $100
tax deduction reduces the income of a taxpayer in the 25% marginal tax bracket by
$25. These examples illustrate two points. First, a tax credit always is worth more
than a dollar-equivalent tax deduction because the deduction reduces the tax liability
by only a percent of the deduction amount, unless the taxpayer is subject to a 100%
marginal tax rate. Second, the benefit provided by a tax deduction increases as the
taxpayer’s marginal tax rate increases; the tax benefit associated with a tax credit
does not. For example, a taxpayer in the 25% marginal tax bracket receives a $25
tax benefitthat is, reduction in tax liabilityfrom a $100 tax deduction, while a
taxpayer in a 33% tax bracket receives a $33 tax benefit from the same deduction.
Axiomatically, those taxpayers who earn more benefit more from an identical tax
deduction. See, e.g., Alvin C. Warren, Jr., The Relationship between a Credit and a
Deduction for the Foreign Taxes of a Multinational Corporation (Harvard Pub.
Law, Working Paper No. 14-23, 2014), https://papers.ssrn.com/sol3/papers.cfm?
abstract_id=2442306 [https://perma.cc/ED92-WT92].
4. Children and childcare are supported through myriad Internal Revenue
Code provisions including the exemption for expenses for dependent care, § 21, the
Child Tax Credit, § 24, and dependent care assistance programs, § 129. Home
ownership is subsidized through the Qualified Residence Mortgage Interest
Deduction, § 163(h)(3). Green initiatives are supported by the energy credit, § 48, a
credit for nonbusiness energy property expenditures, § 25C, and the Residential
Energy Efficient Property Credit, § 25D. Health insurance is supported by the
exclusion of the value of such insurance provided by an employer to an employee
from the employee’s gross income under § 106, as well as through the refundable

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