The 75-Year Thievery Of Joint Tax Returns
Another tax season has ended, and more than 50 million returns arrived at the Internal Revenue Service marked “Married filing jointly”. Few of the filers had any idea that joint returns–created in 1948 and modified in 1969–may be the oldest tax inequity in America. They’ve been picking various pockets for 75 years, and there’s little chance they’ll ever stop.
Let’s find out how and why the returns came to be, and what’s at the root of the thievery. Let’s see how different parties, notably women, have been paying the price. Lastly, let’s examine a newfound connection between joint returns and America’s racial wealth gap.
The modern personal income tax dates back to 1913, and it began with individual returns. Taxes after all are levied on individuals, and that’s how they were reported.
But a shipbuilding magnate named Henry Seaborn decided to test the rules: he sharply reduced taxes by splitting his income with his nonworking wife and filing separate returns. The IRS retaliated by assessing a surtax for the amount he’d saved. Seaborn paid up, then sued in federal district court to get his money back.
He won the district court case, and won again when an appeal by the IRS was denied by the Supreme Court. Some states, though, didn’t allow income-splitting. Congress ultimately nullified those rules with the Revenue Act of 1948, setting up joint tax returns that effectively divided the incomes of all couples.
Overnight, marital status became a major determinant of taxes. Different rates for singles and married couples created specific winners and losers.
Traditional, single-earner families were the big winners. The new joint returns were set up to split total incomes in half and tax each half at the same marginal rates. On the downside, singles were the first financial victims of joint returns. They had to pay a singles penalty, higher taxes than married couples making the same incomes.
Joint returns changed, drastically, with a 1969 revision to the Internal Revenue Code. Instead of taxing both incomes equally, the rate on the second income would start where the marginal rate on the first income left off. It was the beginning of the marriage penalty, higher taxes for couples than singles making the same incomes.
Some feminists, though, saw the marriage penalty as a penalty on women. Since wives were almost always the secondary earners, their incomes were being taxed at the highest rates–and the more they earned, the greater the penalty. A 1971 law review article expanded on the same theme, alleging that the revised tax code was tainted by sexism. In 2010, nearly four decades later, the article reappeared as the opening chapter in a book on tax theory.
By then, though, strong cultural forces had taken the nation in a new direction. Dual-earner couples had become commonplace, and the top earners were often women. Today close to a third of working wives make more than their husbands. To the extent that joint returns are sexist, they’ve become less so: a tax inequity is now more equitably shared.
Sexism of course totally disappears when both partners are the same sex. Some critics of joint returns prefer a nongender term anyway, calling the inequity a secondary-earner penalty.
Dorothy A. Brown is a tax professor at the Georgetown University Law Center. She first came across joint returns when she started preparing taxes for her dual-income parents, both earning about the same. Joint returns, she learned, offered the smallest benefits to precisely those couples. They also meant that her mother and father had to pay the marriage penalty year after year.
That made no sense whatever to their daughter. In her 2021 book The Whiteness of Wealth, she explains why: “Marriage–which many conservatives assure us is the road out of black poverty–is in fact making black couples poorer.” It’s not just the marriage penalty, the book says, it’s one tax code provision after the other.
The 2017 tax bill did away with the marriage penalty in many instances, but far from all. As the CPA Journal put it, other Congresses had “tried to eliminate the marriage penalty, but managed to only alleviate it. (The latest attempt) is not much different.”
Lawmakers could finish the job by time-travelling back to 1948 and reverting to individual returns. If that’s too big a leap, they could at least make joint returns fairer. There are plenty of ideas along those lines. Two examples are a second-earner tax deduction for low and moderate-income families, and an increase in the income limits for tax credits–so that couples don’t have to worry about losing benefits (such as the Earned Income Tax Credit) just because they get married.
Taxpayers who don’t want to wait for Congress to act can always move to Canada. Our neighbor has never had joint returns, and decided against income-splitting in a 1957 case in its own Supreme Court.
Gerald E. Scorse is a former Post-Journal staffer. This piece originally appeared in the New York Daily News.