Abstract This study analyzes the incidence of marriage tax penalties and savings, and proposes policy changes which reduce marriage biases in the tax structure. The analysis indicates that both marriage tax penalties and savings still exist after the 1981 law changes. Focusing upon 1984, zero-bracket amount differences for married and single taxpayers are a significant source of marriage bias, particularly for lower income levels. Similar to single individuals, almost all heads of household realize similar savings when compared with married couples. Two tax policy changes are developed in this study which could further reduce biases. The revenue loss to the Treasury and the reduction in marriage penalties associated with each of the two alternatives are compared to the current marriage deduction approach. Finally, an analysis of the income demographics of the marriage savings and penalties under each alternative reveals that the vast majority of married taxpayers benefit from marriage provisions. Marriage penalties are incurred primarily by middle- and upper-income couples where both have taxable income.
Wiggins et al. (Sat,) studied this question.