Unmarried and Single People and . . .


The Death Tax - - - - - - - -

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Many unmarried people literally cannot afford to die

Some people say that the so-called death tax is unfair to people who have worked hard or invested wisely and therefore have accumulated considerable wealth during their lives. They argue the death tax amounts to double taxation because they have already paid income tax, capital gains tax, or property taxes on the same assets.

Others argue that the since the death tax only applies to wealthy individuals, the tax is progressive because it forces a redistribution of money from the upper class to the middle and lower classes. They also claim that the death tax is one way to force people to leave bequests to charities in their wills as a way of avoiding estate taxes.

Regardless of which perspective may appeal to you, there is one undeniable fact that makes the death tax unfair. The law discriminates against the unmarried.

Upper-income married couples reap a windfall when it comes to federal estate taxes because a person who dies may leave unlimited wealth to a surviving spouse without paying one penny in estate taxes.

In contrast, an unmarried person who dies with an estate over $675,000 can have anywhere from 25% to 60% of his or her estate taken by the federal government in estate taxes. Many states also have significant inheritance taxes.

A wide variety of Americans can be adversely affected by death taxes. We have all read stories about family farms or family businesses which must be sold in order to pay these death taxes. But others can be affected.

A divorced parent who did well in the stock market may want to leave everything to her children. She can, but the government will take a huge chunk first. A middle-aged entrepeneaur who developed a successful business in the Silicon Valley can’t leave his assets to his parents without forfeiting a huge sum to the government. The survivor of a long-term gay relationship falls into the same tax trap because of his or her "unmarried" status.

Repeal of the death tax would put unmarried people on the same par with married people since neither would pay a tax. That would be equal protection under the law.









- - - - - The Social Security Tax

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We are forced to pay the same, but get fewer benefits

Unmarried workers pay the same employment taxes (social security) as do married workers, but the unmarried get fewer benefits in the long run (tens of thousands of dollars) because: (1) studies show that married people tend to live longer and so they will collect benefits longer; and (2) a surviving spouse who has never been employed outside of the home and who has not paid into social security can receive years of survivor benefits after the employed spouse dies; and (3) a domestic partner of an employee may not collect social security survivor benefits.

The Cato Institute has this to say. "[S]ingle workers sometimes object that one-earner married couples obtain a disproportionately high amount of benefits when the spousal benefit is included. Their argument is that the single worker and the earner in the one-earner married couple have contributed the same amount over the years, yet benefits for the single worker are much less." (Philip Harmelink & Janet Speyer, "Social Security: Rates of return and the fairness of benefits," 14 Cato Journal 37 (1994).)

Cato added: "Rates of return for one-earner couples are up to 40 percent higher than for two-earner couples and up to 85 percent higher than for single males."

The authors concluded: "If policymakers are serious about solving the inequities based on marital status, an alternative approach to solving the problem is to move toward a social security system that bases all benefits on each individual's contributions."

They suggested that basing benefits on an individual's contributions, with an opportunity to adjust for special needs of spouses, widow(er)s, and divorcees through the purchase of such coverage, could, in the long run, be a workable solution to the marital status inequity.

President Bush has proposed "partial privatization" which would allow a younger worker to invest some of the social security tax taken from his or her paycheck and place it into a private account which could be transferred to a beneficiary at the time of death. Single people now lose all benefits when they die. United Seniors Association, a national group with 550,000 members, supports this plan.