Last week in a monumental decision, the Supreme Court in a 5-4 split decision made same-sex marriage legal in all 50 states. Many are appalled at the decision including Justices Roberts and Scalia who angrily dissented.
For the other side, the Obama Administration is gleeful of this landmark decision, but more happy for another reason. The administration now will have the ability to tax gay couples at a higher rate.
The CBO estimates that legalizing gay marriage could help to generate an additional $200 million -$400 million in revenue each year. Music to Obama’s ears.
“Gay couples lobbying for marriage equality are, on average, lobbying to be given the right to pay more in taxes,” says Justin Wolfers, an economist at the University of Michigan.
One large impact for the increase in taxes is due to the “marriage penalty.” According to the tax code, couples who earn a similar income tend to be taxed more than if they were single, because their combined income drives them into a higher bracket, and they lose the benefit from things like deductions or the child and dependent care credit.
For example, two singles each making up to $89,350 would each be in the 25 percent tax bracket if they were to file on their own. But together, their $178,700 combined income puts them in the 28 percent bracket. The 25 percent bracket stops at $148,850 for couples who are married and filing jointly.
One thing is certain, if there is additional money through these taxes, the government will find a way to spend the money – plus millions more.