Last month, President Clinton vetoed a bill that could have helped working wives pursue a professional career, raise a family, and keep more of their hard-earned money. The president contends the bill would have primarily benefited the rich, but a closer look at the facts shows otherwise.

Today, many working married women would be financially better off if they were single. As it stands, the federal tax code forces a higher income tax burden on a married couple earning the same income as two single earners. Assume Amy and John are employed singles each making $40,000 a year. Individually, in 2000 they would pay $5,779 in federal income taxes, for a joint total of $11,558. Now, if Amy and John marry and together earn $80,000, they face a tax liability of $13,081 in federal income taxes. That is a marriage penalty of $1,523, the difference between the married and unmarried income rates. For couples like Amy and John, that money could go a long way.

Here’s how the marriage penalty works. The first tax penalty comes with the standard deduction. A standard deduction allows tax filers to subtract a flat dollar amount from their gross income. That reduces the amount of earnings subject to taxation. The deductible varies according to filing status. As singles, Amy and John can each claim a $4,400 standard deduction, a combined total of $8,800. As a married couple, they can only declare $7,350—a full $1,450 less than if they were not married.

The federal tax code applies a second penalty to income brackets. A single worker can claim up to $26,250 of his or her taxable earnings at the lowest 15-percent bracket. Married couples can only claim up to $43,850 at that rate. Contrast that to $52,500 for two individual workers. The difference of $8,650 is bumped up to a higher bracket of 28 percent for a wedded couple.

Because the federal income tax imposes such a heavy bias, Amy might choose to stay single or, once married, might choose to work fewer hours. This tax bias is affecting millions of American couples every year. Fortunately, in California, the state’s tax system does not penalize these families further.

Unlike the federal tax code, California expands the size of the tax brackets for joint filers to twice the size of the brackets for individuals. For a single worker in 2000, the lowest tax bracket ranges from zero to $5,454. For a married couple filing jointly, the first rate bracket is automatically doubled from zero to $10,908; the same applies to the remaining income brackets. The state also doubles the amount joint filers can deduct from their state gross income, essentially treating married and unmarried couples the same.

Wives need more opportunity for pursuing a professional career while providing for themselves and their families. The Marriage Tax Penalty Relief Act would have provided such relief by eliminating the standard deduction bias and expanding the lowest income bracket for joint filers. By failing to override the president’s veto in Congress, wives and married couples must continue to wait for the kind of equal treatment and tax relief they deserve.

– Alejandra Arguello

Fiscal Policy Analyst