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Taxwise, It May Be Better Not to Get Married!

Source: Market Watch, January 4, 2013
When couples marry, second earners are typically stuck paying higher marginal tax rates than if they were single. When President Obama signs his new tax bill, Americans at both ends of the income scale will be penalized for tying the knot, says Diana Furchtgott-Roth, a senior fellow at the Manhattan Institute.

  • Low- and middle-income women will support the renewed extension of unemployment insurance while footing more of their health insurance bills because of Affordable Care Act (ACA) subsidies that phase out at 400 percent of the poverty line.

  • Seventy percent of poor families with children are headed by single parents who will be adversely affected as their unemployment insurance, Supplemental Nutrition Assistance Program benefits, and tax credits are phased out.

  • For married upper-income women, the new tax law will create a top tax rate of roughly 42 percent plus state and local taxes for a total tax rate of more than 50 percent.

Combined, the new tax law will place downward pressure on labor force participation rates as increasing numbers of Americans will exit the workforce. The bottom of the income scale will be impacted further as health insurance premium credits for married couples under the ACA will be determined not directly by income, but by the poverty line.

The poverty line for one person is $11,170 with an additional $3,960 for a spouse, making it far more likely that a second household income will place that household above the poverty line, raising their premium payments. With less government support for health insurance payments for married couples, lower-income individuals will have good reason to remain single, as will upper-income individuals entering a higher-income bracket upon marriage.