Marriage-Penalty Tax Hurts Black Families More, Brown Says

February 2, 2004
Law professor Dorothy Brown is teaching the short course Critical Race Theory at the Law School this semester.

Federal tax laws that hurt dual-income married couples disproportionately hurt African-American households, said visiting law professor Dorothy Brown, noting that married black women account for 40 percent of their household's income, while married white women's income accounts for only 29 percent. Although tax laws are written to be neutral, they can have varying impacts on households of different races, Brown explained at a luncheon sponsored by Women of Color Feb. 3. The discrepancy may result in part because African-American employees don't earn wages equal to whites, which may encourage black women to work in support of the family income.

"You need targeted marriage penalty relief for dual-income couples," Brown argued. When joint federal tax returns began in 1948, 80 percent of husbands worked and had a stay-at-home wife, thus the law benefited most of the population — although married black women likely worked more than white women then as well. "Now you see many more couples where you need both individuals working to pay the bills."

Brown, a critical race theorist visiting from Washington and Lee University's School of Law, said she was inspired to study the issue by a colleague's call for black scholars to look at how taxes might impact African-Americans differently, and a U.S. Commission on Civil Rights report noting the differences in the proportion of dual-income houses by race.

Brown described both the marriage bonus and penalty effects of the federal income-tax structure: if a married couple includes one spouse earning an income and another who stays at home, they receive a tax break, but married individuals who both work are taxed more than if they weren't married. For the couple receiving the marriage bonus with an income of $50,000, "that $50,000 is going to be taxed at a rate where some of that income is effectively shifted to the other spouse."

Brown studied U.S. Census data and found that bonus households are most likely white and penalty households are most likely to be black at virtually all income levels. In the $50,000-$60,000 bracket, 26 percent of whites are affected by the penalty, while 43 percent of African-Americans are. In the $80,000-$90,000 range, the number of African-American households penalized jumps to 49 percent, while 27 percent of white households are affected.

"Black husbands and black spouses are most likely to earn roughly comparable amounts," she said. Black women are much less likely to be married than white women as well, Brown said, so "are tax costs facilitating the lower marriage rates in blacks?"

Many tax-law academics don't see race as an issue, she said, but even former Supreme Court Justice Harry Blackmun "recognized that there might be a racially disparate impact" from laws that appear neutral on the surface. But "uncovering the disparity isn't that easy."

Brown is also exploring how the earned-income tax credit may affect American households of different races and incomes. "At the low-income level, $10,000 and less, I found most households … [black or white] were in single wage-earner households." She noted that if you are a single parent making $10,000 and have two children, you get a $2,000 earned-income tax credit, but if you then marry someone making $10,000, the credit is virtually eliminated. "It's a huge — percentage-wise — penalty, because of how the earned-income credit operates," she said, drawing a plateau in the air to show visually how it falls across income levels.

In preparation for a lecture on race, taxes, and Enron, Brown researched Enron pensions as an example of corporate-sponsored pension plans — who was eligible for a pension, who chose to participate, and how much employees actually collected. She said racial dynamics could come factor in since, for example, part-time employees won't necessarily be eligible to participate in pension plans, and they may be disproportionately minorities. Younger workers may not participate because they are more likely to leave a job before they become eligible (five years at Enron).

So far, Brown has found that whites were most likely to be eligible to participate in pension plans, then African-Americans, Asian-Americans, and Hispanic-Americans, respectively. Of those eligible, 50 percent of whites, 42 percent of Asian-Americans, 41 percent of African-Americans, and only 25 percent of Hispanic-Americans participated. Brown said even 50 percent is not a high rate, but "25 percent is scary." She wondered whether companies should be held responsible if they have policies that hurt diversity if studies prove that diversity is valuable and profitable for a company. Many policies that may appear neutral to race or gender are not when seen in action, she said. "I've learned the longer I've done this that if you stare at it long enough, something's going to come to you."

Regarding her marriage-penalty research, Brown said the Census data she examined was so large — 5 percent of the population — that she hasn't yet had time to explore how such tax laws affect households of other racial backgrounds, although she wants to study the impact on Asian-Americans and Hispanic-Americans. "I do think that too often in this country we tend to think in white-black terms," she said.

An unusual convergence of people who oppose the marriage-penalty tax as bad policy and those who want to eliminate it for social reasons have pushed the marriage penalty to the forefront of tax reform. President Bush minimized the marriage penalty more than the Clinton administration did; by tinkering with the tax rates, Bush's plan allowed couples to earn more money without being forced into a higher bracket. However, the administration's recently proposed $1.5 billion plan to encourage marriage doesn't address the penalty.

Brown suggested that while people thinking of getting married may not be able to articulate how they are hurt by the marriage penalty, they know they will pay more taxes in the end. According to economists, "at most, the tax burden will cause a delay in marriage [couples may wait to marry when the next tax year begins], but it won't cause people not to marry," she said, adding, "but I've never seen a study done based on race."

Until there are equal wages among the races, more African-Americans are likely to be penalized, she said. The makeup of Congressmen's households may also be a factor in reforming the tax.

"Until we see those families getting hit hard with the marriage penalty, I don't think we're going to [hear] 'let's get rid of the marriage penalty.'"

Brown said the marriage penalty was part of a "more holistic problem with the Internal Revenue Code that needs to be fixed." She plans to study other financial issues that have a similar impact, such as Social Security, where the single wage-earner family may also benefit in some cases over dual-income families.

"I don't care [whether you work or stay at home], I just don't think the tax law should be taxing marriage," she said. "Why are we seeing Congress encourage certain marriages and discouraging others?"

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