Column One:
Eye on Unmarried America

April 10,  2006  



IRS digs into pockets of low income singles

By Thomas F. Coleman

Millions of Americans will be gathering their receipts, tabulating income, and searching for possible exemptions and deductions this week.  Time is running out for taxpayers to fill out tax forms and get them into the mail by April 17.

When they see the bottom line, many Americans -- especially middle-income working spouses with children -- will have smiles on their faces.  But singles without children -- especially those who are barely above the threshold of poverty -- will have no cause to rejoice.

A report published by the Urban Institute in 2004 documented how married and single people are treated differently in terms of taxation of those near the poverty line.  In 2003 the poverty threshold was $9,573 for a single person without children and $12,321 for a married couple without children.

"A single person with no children begins paying taxes slightly before his or her income reaches the poverty threshold; a married couple with no children begins paying taxes slightly after their income reaches the poverty threshold," the report explains. 

In other words, no married couple living in poverty will pay income tax, although some single people in poverty will.  What's that all about?

John O. Fox, tax attorney and author of "If Americans Really Understood the Income Tax," discussed the little noticed "singles penalty" with the Washington Post in May 2003. 

"Single people had better start paying attention," Fox told the Post.  "The lawmakers' obsession with eliminating the so-called marriage penalty -- could it be because married people tend to vote more often? -- is unaccompanied by any outrage over the singles' penalty -- the obligation of millions of single people to pay income taxes on an appallingly low level of income."

To make his point, Fox gave two hypothetical examples.  One was a low-income single woman (Jennifer Adams) living alone and the other was a middle-income married couple (Tom and Grace Chance) with two children. 

Under Fox's example, Jennifer was 33 and earned $11,000 cleaning motel rooms. She took the bus to work because she could not afford parking fees, rented an efficiency apartment for $400 a month, received no work benefits, paid all her health insurance premiums and out-of-pocket health costs, and had no other income. She could not afford to put anything away for retirement.

Then there's Fox's hypothetical married couple. Tom and Grace Chance are 31-year-old parents of 1-year-old twin girls. Tom earned $66,000 as a full-time associate in a national accounting firm, plus $3,000 his employer contributed to his 401(k) plan, to which Tom also contributed $6,000 out of his salary. Grace earned $11,000 as a part-time secretary.

The scenario Fox gave to the Post listed other tax breaks that the married couple could access which were not available to the cleaning woman.

Tom's employer had a "cafeteria plan," which offered a large menu of opportunities for him to avoid taxes on the portion of his wages his employer uses to pay many of his personal expenses. Tom's menu -- totaling $16,000 -- covered premiums for a family health insurance policy and a disability-income policy; out-of-pocket family medical expenses and parking expenses at work; and $5,250 (the maximum allowed under the rules) for college courses he was taking in late 19th-century expressionist art.

Tom and Grace owned a four-bedroom house. They had mortgage interest, property taxes and state income taxes to pay. They also made small charitable contributions. These expenses came to $18,800.

Fox asked readers of the Post: "Should Jennifer pay an income tax? Should the Chances? If only one should pay, which one?

The answer, according to IRS rules and Fox's calculations: Jennifer had to pay; Tom and Grace did not.

This result does not seem fair to me and I suspect that many other Americans, especially low-income singles, would find it hard to justify.  So what can be done about it?

What John O. Fox told readers of the Washington Post three years ago seems just as valid today as it was then:

"A worthy first step might be to ask candidates to explain why a struggling single person like Jennifer Adams should pay an income tax, while fairly comfortable marrieds-with-children like the Chances should not. I don't know why. Do you?"

Single taxpayers should remember that all members of Congress are up for reelection this year.  April 18 would be a good time to write your Senator and Representative to tell them how you feel about "singles penalties" in the tax codes.

I say "singles penalties" (plural) because it's not just the Income Tax Code which treats unmarried Americans unfairly by giving a "marriage bonus" to many couples who file jointly and by taxing domestic partner health benefits but not spousal health benefits. 

Social security tax is unfair to singles too.  If a single person dies a month before retirement, everything paid into social security is forfeited.  But if a married person dies, the surviving spouse gets a survivor benefit. 

Federal estate tax should not be forgotten.  A married person can leave an unlimited amount of wealth to a surviving spouse, tax free.  But a single person with an estate above the exemption level can't leave a bequest to a friend, sibling, or partner without Uncle Sam taking a hefty bite first.

If you're single and feel you are paying more than your fair share of taxes, mark your calendar for April 18.  Call it singles' tax protest day.

Unmarried America 2006

Thomas F. Coleman, Executive Director of Unmarried America, is an attorney with 33 years of experience in singles' rights, family diversity, domestic partner benefits, and marital status discrimination.  Each week he adds a new commentary to Column One: Eye on Unmarried America. E-mail: Unmarried America is a nonprofit information service for unmarried employees, consumers, taxpayers, and voters.