It’s time to eliminate marriage penalties in the U.S. tax code

It’s time to eliminate marriage penalties in the U.S. tax code

Marriage penalties in the U.S. tax code discourage family formation and upward mobility for low-income Americans.

It’s time to eliminate marriage penalties in the U.S. tax code

This article was originally published at Institute for Family Studies.

The U.S. individual income tax structure and the safety-net assistance system exact financial penalties on married couples, which worsen when children are in the family. The effect of these penalties is the opposite of what public policy should be. Research has established that society benefits immensely from stable and healthy marriages. This article focuses on U.S. Tax Code and restoring the income tax to its primary purpose while eliminating marriage penalties (it is excerpted from section 1 of a two-part policy brief on how to eliminate marriage penalties from the tax code and safety-net programs).

Remove Safety-Net Programs from the U.S. Tax Code

Of the federal and state agencies that run more than 80 federal programs intended to help low-income individuals and families, perhaps the worst administrator is the Internal Revenue Service (IRS) that runs several safety-net programs, including the Earned Income Tax Credit (EITC) that provided $64 billion in cash assistance to 23 million tax filers in 2024.

While many policymakers view the income tax system as an efficient way to dispense safety-net benefits, IRS performance leaves much to be desired.  A recent Wall Street Journal article listed the EITC with the second-highest improper payment rate—more than five times the average improper payment rate. The Journal’s article did not reveal anything new. The IRS also runs the program with the highest improper payment rate, the American Opportunity Tax Credit.

When it comes to marriage penalties, the income tax structure is a bad fit for distributing money to needy households. While there are tax filing statuses for married couples, heads of household, and single individuals, there is no option for unmarried couples. Consider an unmarried couple with two children. One partner can claim both children as head of household while the other files as a single person. Or they can split the children as heads of household. Either way, they will be treated differently than if they were married. 

Congress could create a new tax filing status to accommodate unmarried couples. However, it may be more trouble than it is worth. Unmarried couples run the gamut in financial and relational commitments, and using tax law to address the various situations is complicated and may be perceived as too intrusive for those who just want to pay their tax liability.

Besides, the IRS is set up for annual returns and refunds, not monthly payments. EITC recipients must wait until the following tax year for their benefits. Monthly payments would give assistance when needed, allow families to properly budget, and would be a more effective way to encourage employment, one of the goals of the program. 

The EITC had an advance payment feature that was repealed in 2010 due to poor participation and administrative problems. The system relied on employers making the monthly payments to their employees and then being reimbursed by the IRS, but the Government Accountability Office found IRS procedures to be ineffective with noncompliance rates of 80 percent. Although repealing the advance payment feature eliminated this extreme noncompliance rate, the IRS continues to struggle with taxpayer noncompliance with the EITC program.

Make Income Taxes Neutral to Marital Status

Removing safety-net programs from the tax system would allow Congress to focus on making the income tax marital status neutral. In 2017, Congress was successful in eliminating marriage penalties for single individuals who want to marry, provided they have no children and do not qualify for refundable tax credits.

However, marriage penalties remain for the rest of tax filers. For example, suppose a mom earns $20,000, a dad earns $30,000, and they have two children. Table 1 shows the simple tax liability before tax credits for tax year 2025 assuming that, as an unmarried couple, each parent claims one child and the standard deduction. The tax liability before tax credits is $750 if they live together unmarried but $2,000 if they are married, which means a marriage penalty of $1,250.  Even if one parent claims both children, there would still be a penalty.

The example in Table 1 is just one wage combination for a couple with two children. The Georgia Center for Opportunity ran 40,401 wage combinations for this couple if each partner claims one child on their taxes and found that 81% had a marriage penalty. The figure below shows the distribution of the penalties (in red), neutral outcomes (in gray), and the bonuses (in blue). 

One option Congress might consider to eliminate income tax marriage penalties is the flat tax, which treats all taxpayers the same regardless of marital status. The reason can be easily shown using mathematics because the flat tax follows the distributive law of multiplication (see full policy brief for more). 

Conclusion

The U.S. Tax Code is ill-suited for running safety-net programs without marriage penalties. Furthermore, the IRS has an awful record of improper payments and noncompliance when it comes to running its safety-net programs. Therefore, an important step to eliminate marriage penalties is to take those programs away from the IRS and give them to an agency that knows how to run safety-net programs.

Download the full policy brief for an explanation of how these other agencies can eliminate all marriage penalties in safety-net programs.

Image Credits: Canva, Georgia Center for Opportunity

Are Food Stamp Benefits Too Little?

Are Food Stamp Benefits Too Little?

Are Food Stamp Benefits Too Little?

Key Points

  • Research Indicating SNAP Benefits Are Too Low: Urban Institute tool suggests that the average cost of a meal exceeds the maximum SNAP benefit, emphasizing the potential inadequacy of the program.
  • Concerns About Research Methodology: Emphasizes that SNAP is meant to supplement, not replace, food purchases, and spending habits should be expected to exceed the lowest-cost food budget when households have income.
  • Drawbacks of Raising SNAP Maximum Benefits: Highlights the fiscal irresponsibility of increasing SNAP benefits amidst a large federal deficit and national debt, which could contribute to inflation and rising price levels.

Recent studies are raising concerns about whether the help provided by the Food Stamp program, now known as the Supplemental Nutrition Assistance Program (SNAP), is sufficient. This program, which served 41.2 million people in the Fiscal Year 2022, is the biggest food assistance initiative in the United States.

But before you call your congressperson, let’s take a closer look at the research that suggests SNAP benefits might be too low.

The Research Findings

The Urban Institute has developed a tool indicating the average cost of a “modestly-priced” meal often exceeds the maximum SNAP benefit allotted for a meal. For instance, in the last quarter of 2022, the average “modestly-priced” meal cost was $3.14, surpassing the calculated maximum SNAP benefit of $2.74 for a meal in the 48 contiguous states.

To make matters more complicated, food prices vary across the country. The tool allows users to see how the maximum food benefit falls short in different counties. According to the Urban Institute, the maximum SNAP benefit covered the cost of a modestly- priced meal in only 27 out of 3,143 counties, or just 1 percent of the total.

Other organizations, such as the Brookings Institute, share similar concerns about the adequacy of SNAP benefits, putting pressure on Congress to consider increasing the program’s maximum benefit.

Are We Comparing Apples and Oranges?

It’s essential to be cautious, though, as the research might be comparing different things. The maximum SNAP benefit is based on the Thrifty Food Plan, intended to be the lowest-cost food budget while still providing necessary nutrition for a family. In fact, it is the lowest cost budget produced by the U.S. Department of Agriculture, which begs the question of how the Urban Institute is defining a modestly priced meal.

The Urban Institute’s calculation of a “modestly priced meal” is based on the spending habits of households at or below 130 percent of the official poverty level, but who were also considered to be “food secure.”

It should be expected The Thrifty Food Plan is lower than the actual expenditures of this demographic group because, as the name suggests (the Supplemental Nutrition Assistance Program), SNAP is meant to supplement, not replace, food purchases. As households earn income, it’s expected they will spend more on food than what the minimum budget allows.

Why Is There Still Food Insecurity?

Food insecurity is determined by using answers to the Current Population Survey, but the determination doesn’t specifically address the adequacy of the SNAP maximum benefit. Other factors, like spending habits, diets, and dealing with the stress of poverty, also play a role. It’s important to note that the U.S. faces an obesity problem, even among SNAP participants, suggesting that the issue may not be too few calories but rather poor eating habits.

However, the obesity problem probably has more to do with more nutrition education, better eating habits, and improved financial literacy for participants rather than the program itself.

The Solution: Congress should reform the Supplemental Nutrition Assistance Program (SNAP) so that more households can easily overcome benefits cliffs through steady work and typical pay raises and achieve self-sufficiency faster.  

SNAP, TANF, welfare, benefits, benefits cliffs

The Solution: Congress should reform the Supplemental Nutrition Assistance Program (SNAP) so that more households can easily overcome benefits cliffs through steady work and typical pay raises and achieve self-sufficiency faster.  

Negatives of Increasing Benefits

While some might think increasing SNAP benefits is harmless, there are negative consequences to consider. It can affect upward economic mobility for participants ready to leave the program, making it more costly with unwanted economic side effects.

A recent study highlighted a benefit cliff problem in SNAP, where households lose more total income than gained from increased earnings. The study identifies the importance of controlling the maximum benefit to solve benefit cliffs and marriage penalties.

Benefit cliffs are a big problem for households trying to stop relying on safety-net assistance programs. They face an unfair choice between being worse off financially and giving up their long-term goals of moving up economically through steady work. After vulnerable people get help from the safety net, government assistance should help them move forward, not hold them back.

Considering the cost of the program is also important. In the fiscal year 2022, the federal government spent $120 billion on the Food Stamp program. However, the government had a $1.4 trillion deficit, increasing the national debt to over $32 trillion. This financial irresponsibility is a major reason for inflation and higher prices, which impact those on safety-net programs the most.

The Best Strategy Forward

Increasing the maximum SNAP benefit should be approached cautiously to balance adequate nutrition for families while controlling program costs. The Urban Institute’s definition of a reasonably priced meal falls short because they are measuring the wrong aspects when compared to the criteria set for the maximum allotment. There seems to be a methodology problem in their approach.  It’s extremely important to get the number right to ensure adequate nutrition for families but in a way that is thrifty to keep program costs under control and to make it easier to fix benefit cliffs and mitigate marriage penalties.

Those concerned about low SNAP benefits should also consider that other assistance programs help participants, such as free school meals and food banks operated by non-profit organizations. Plus, state agencies that administer SNAP all have nutrition education programs to help participants know how to budget for nutritious food. The federal government also assists states in those efforts by providing tools, curricula, and a website. Ultimately, determining the adequacy of Food Stamp benefits should rely on nutrition science, consumer science, financial education, and thriftiness.

 

*Erik Randolph is the Director of Research for the Georgia Center for Opportunity.


*Monthly average for the fiscal year per program data tables of the Food and Nutrition Service, U.S. Department of Agriculture.

Food Stamps: New Report Outlines 5 Possible Ways To Combat SNAP ‘Benefits Cliffs’ at Federal Level — Would They Save Recipients Money?

Food Stamps: New Report Outlines 5 Possible Ways To Combat SNAP ‘Benefits Cliffs’ at Federal Level — Would They Save Recipients Money?

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Food Stamps: New Report Outlines 5 Possible Ways To Combat SNAP ‘Benefits Cliffs’ at Federal Level — Would They Save Recipients Money?

A benefits cliff is when a household loses more in net income and benefits from governmental assistance programs — like SNAP — than it gains from additional earnings. According to a report by the Georgia Center for Opportunity, this net loss is a “perverse incentive” discouraging any desire to increase income.

“The very basic concept is that when you lose more in taxes and benefits than you receive from a gain in additional earnings, that’s how we’re defining a cliff,” Erik Randolph, GCO’s research director, told The Center Square. “Let’s say that you get a pay raise worth $2,000, but you actually lose $3,000, you’re $1,000 behind; you’re worse off financially than what you were.”

 

Food Stamps: New Report Outlines 5 Possible Ways To Combat SNAP ‘Benefits Cliffs’ at Federal Level — Would They Save Recipients Money?

Georgia report finds steps Congress should take to SNAP ‘benefits cliffs’

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Georgia report finds steps Congress should take to SNAP ‘benefits cliffs’

Design flaws in the federal food stamp program hinder recipients’ upward economic mobility and effectively force them into governmental dependency.

That’s the upshot of a new Georgia Center for Opportunity report exploring possible solutions for addressing the benefits cliffs in safety-net programs like the Supplemental Nutrition Assistance Program.

Erik Randolph, GCO’s research director, told The Center Square that the report — “Solving the Food Assistance (SNAP) Benefits Cliffs” — identified several steps federal authorities can take to ensure that SNAP functions as safety net programs should. In doing so, the federal government can eliminate SNAP benefit cliffs without spending more money.

“The very basic concept is that when you lose more in taxes and benefits than you receive from a gain in additional earnings, that’s how we’re defining a cliff,” Randolph said. “Let’s say that you get a pay raise worth $2,000, but you actually lose $3,000, you’re $1,000 behind; you’re worse off financially than what you were.

“The trade-off is that you can accept the pay raise but end up with less money,” Randolph added. “If someone’s acting in a rational manner, why would they do that? But in the long term, it’s going to harm them because it’s going to reduce their economic mobility. So, the system shouldn’t have that as part of it. It should be a hand up and not a handout that prevents you from making the right decision or that’s encouraging you to make the wrong decision.”

 

Storm clouds on the horizon for the economy

Storm clouds on the horizon for the economy

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Storm clouds on the horizon for the economy

The latest Consumer Price Index released today by the U.S. Bureau of Labor Statistics shows that in the past month, the Federal Reserve successfully achieved its inflation target by meeting a 2% increase in prices on a seasonally adjusted monthly basis. This signifies a step towards maintaining economic stability and balance. But there are still storm clouds on the horizon.

The Georgia Center for Opportunity’s (GCO) take: “While this is positive news, a concerning trend has emerged since the onset of the pandemic,” said Erik Randolph, GCO’s director of research. “Overall, goods cost 18.2% more today than they did before the start of the pandemic due to rampant inflation. Simply put, everyday essentials are far less affordable in 2023 than they were three or four years ago. That hits the impoverished and low-income Americans the hardest. At the federal level, there appears to be a lack of substantive discussion regarding measures to restore the diminished purchasing power of consumers. That is concerning.”