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Married taxpayers get some temporary tax relief

Not so long ago, almost half of America's married couples discovered each April 15 that they had exchanged an unspoken vow during their wedding ceremonies to pay more taxes.

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Thanks to the peculiarities of the tax code, those couples found that when they earned roughly the same salaries, they tended to pay more in taxes than they would if both were single filers. This so-called marriage penalty showed up in 1969, when Congress tried to equalize what was then an unfair advantage couples held over single taxpayers.

But in the last few years, lawmakers have made tax-law changes that have helped ease the penalty. There's just one problem. The relief is temporary. All marriage tax relief provisions are set to expire Jan. 1, 2011. This sunset date was added by lawmakers to ensure that all the bill's tax changes, marriage penalty included, met federal budget limits. There are some proposals to make these temporary changes permanent, but the size of the federal deficit poses a political challenge.

Tax balancing act
These marriage penalty machinations are just the latest in a long-standing tax-code balancing act by politicians. The trick is to agree on exactly which method helps the most couples without hurting another segment of the taxpaying public.

The origin of the penalty -- trying to level the tax playing field for singles -- points out the difficulties lawmakers face when tweaking the tax code. They must find another source for the tax money the budget will lose by eliminating the offending provision while not hurting another group in the process.

Further complicating the marriage penalty fix is the fact that an almost equal number of couples have enjoyed a marriage "bonus," actually paying less taxes because of the way the tax rates were set up. Neither they, nor their Congressional representatives, wanted to take that break away.

Two didn't necessarily get the same tax breaks as one
Before Congress tweaked the tax brackets, the marriage penalty arose primarily because of the standard deduction and the progressive nature of tax rates. So Congress focused on these areas in making changes.

When Congress devised the standard deduction, the amounts were based on the assumption that married couples generally share expenses and therefore live less expensively than do two single individuals, even if the singles make the same amount of money. So the singles, based on the two-live-more-cheaply-than-one rationale, were given a more generous per-person deduction.

Also working against some married filers was the fact that that more of their combined income often ended up being taxed at a higher rate than if they'd stayed single and computed their tax bills separately. The tax brackets are progressive, meaning that the rates increase as income goes up; this phenomenon is felt more acutely when two incomes are combined to arrive at the taxable amount, especially the way the brackets were previously designed. Often two singles would find they each paid taxes at the 15 percent bracket, but when they combined their income and looked at the married filing jointly brackets they landed in a higher bracket.

 
 
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