Jeb Bush’s tax plan includes a novel idea to end “marriage penalties” created by the tax code, but some conservative tax experts think it could be a step in the wrong direction.
To prevent couples from facing a higher tax bill if they get married, Bush would simply allow married couples to file as singles if it would be more advantageous.
The Republican presidential candidate — no. 2 on the Examiner’s power rankings — explained the provision Thursday in a radio interview with conservative radio host Hugh Hewitt by saying that “if you’re a spouse that’s at home, you right now, if you wanted to work, you have to pay taxes on the cumulative amount of income that your family has earned, and that’s a deterrent for people that want to get back in the workforce. What we’re proposing is that a spouse who wants to get back in the workforce, that those dollars they earn won’t be taxed at all.”
Yet creating an incentive for non-working spouses to work rankles some conservative tax experts, even ones who have long called for an end to tax marriage penalties and who otherwise like Bush’s plan to cut tax rates and smooth out distortions in the code.
The provision “kind of buys into a radical individualist view of the economy, which is kind of like an Ayn Rand version of it rather than a conservative version,” said Robert Stein, a former Treasury official and conservative tax expert. “Is the individual the center of the universe, or is the family the center of the universe?” Stein asked.
Stein’s objection is the idea that one provision of Bush’s plan would create a bias in the code in favor of sending a homemaker into the workforce.
Take the example of a single-earner family making $75,000 that wanted to make an additional $10,000 under Bush’s framework. If the higher earner took a second job to earn that amount, he or she would face 25 percent tax. But if the lower earner entered the workforce to take a job, he or she would only face the 10 percent tax rate.
That incentive is “basically a slap in the face to families with homemakers,” Stein said.
Ryan Ellis, tax policy director at the conservative group Americans for Tax Reform, said the simplest way to eliminate the tax penalty would be to make the tax brackets for married couples filing jointly double those for single filers, and doing the same for other tax provisions.
The interactions of uneven brackets and deductions, credits, and other preferences create marriage penalties and bonuses throughout the income spectrum. Lower- and middle-class couples who earn similar amounts are the hardest hit.
Bush’s brackets would double the brackets, but not for higher incomes. “Why they didn’t, and instead chose a convoluted second-earner provision that picks winners and losers within our base is bizarre,” Ellis said.
Bradford Wilcox, an expert who has researched the benefits of marriage, also took issue with that part of Bush’s plan.
“I am happy that Governor Bush is seeking to minimize the marriage penalties in the tax code. But his plan ends up devoting substantial tax benefits to relatively affluent dual-earner families,” said Wilcox, who is associated with the right-of-center think tank American Enterprise Institute and the Institute for Family Studies. “It would be better to give all families a more generous child tax credit and let American families choose how to best juggle their work-family responsibilities.”
Not all experts on the right side of the political spectrum agreed, however.
Jason Fichtner, a senior research fellow at the libertarian Mercatus Center at George Mason University, called the idea “fantastic.”
Fichtner proposed the idea of letting couples file as individuals in a 2012 paper and was pleased to see the same policy show up in Bush’s tax plan.
But the issue isn’t just academic for him: He has avoided getting married under the law to avoid tax penalties. Instead, he and his wife last year had a “libertarian marriage,” in which they did not seek government recognition, to save “several thousand” dollars a year.
Fichtner argued that under the lower tax rates Bush would set, almost all married couples would be better off under his plan than they would be under the current code, including those who currently reap a marriage bonus.
That includes him. “I was joking when it came out that Jeb Bush is trying to make an honest man of me,” he said.
