Public Forum: The tax burden on marriage
With the huge deficit, President-elect Obama says that he will go line by line through the budget to make cuts. He also says he wants to make the tax code more fair
Minnesota politicians need to do the same.
Perhaps they should begin by looking at the disparity between married and cohabiting couples in regard to various tax credits. Let me give you an example: Jane has two children, ages l1 and 12. She earned $15,000 and collected $12,000 in child support in 2008. She paid $1,800 in child care expenses and $2,700 in qualified education expenses for these children (music lessons, dance lessons, school supplies and a band instrument).
Jane and the two children live with Jack.
Jack and Jane have two children together, ages 8 and 9. Jack earned $30,000 in 2008 and paid child care of $1,800 and $2,700 in education expenses for their 8- and 9-year-olds.
Jane's two older children are claimed as dependents by their father so he can deduct the $7,000 in personal exemptions and receive the $2,000 child tax credit.
Jane and Jack each file their 2008 federal and Minnesota tax returns. No federal or state taxes were withheld from wages. Both qualify for the earned income credit, Jack qualifies for the federal child tax credit, they both qualify for Minnesota working family credit, dependent care credit and education credit.
Jane receives "refunds" of $4,824 from the IRS and $3,935 from the Minnesota Department of Revenue. Jack receives "refunds" of $3,071 from the IRS and $2,744 from Minnesota. The combined "refunds" total $14,574.
If Jane and Jack get married and have exactly the same income and expenses, they would receive a refund of $985 from the IRS for the child tax credit but owe Minnesota $1,078.
The difference between co-habitation and marriage is a whopping $14,667. (I'd go into detail but letters are limited to 350 words.)
This disparity could be easily corrected by adding a line to the tax forms requiring child support and domestic partner's income be included in the calculations for the tax credits.