If you are unmarried,
then chances are you
are paying more than
 your fair share of

 News stories about

-- Overall taxes go up for singles in many states

Baby boom generation is shafting Generation X

-- Did Bush lie about everyone getting tax relief?

Tax cut bill makes a fine mess

-- Millions of single taxpayers get no tax cuts

-- Tax cuts mostly for rich married savers

-- The myth of the marriage penalty

Tax expert John O. Fox raises several important questions the candidates do not want to hear.   His new book contains a chapter about unfair taxation of low-income singles.

Question 9: Single and Paying for It
A single person who doesn’t earn enough to reach the poverty level may still owe income taxes. 

Ask the Candidate: Why shouldn’t Congress do for single persons what it does for a family of  four—exempt them from income tax until their income rises well above the poverty level?

To learn more about the book, click here.






Monday, April 12, 2004

Online Chat: The Singles Penalty

John O. Fox
Tax Policy Expert

It's that time of year, when one of life's two inevitabilities comes around again. Yes, time for taxes. Time to struggle once more with the voluminous U.S. tax code as we labor to figure out how much we might or might not owe Uncle Sam this year. If you find the whole process mind-bendingly daunting, there's a good reason why. The tax code is full of inconsistencies and unfairnesses, says tax expert John O. Fox, who discusses one you might not be familiar with in his Sunday Outlook piece, For Singles, April Really Is the Cruelest Month. Everybody's aware of the marriage penalty, but how many people have ever heard of the "singles penalty"? That's right -- singles are unfairly, uh, singled out by the federal government to pay income tax even when they're living at the poverty threshold. Congress rightly recognized the injustice of the marriage penalty and has made fixes in the code to alleviate its effect on families with children, but now it's time to stop treating singles like second-class citizens, Fox argues.

Fox was online Monday, April 12, at 2 p.m. ET to take questions about the singles penalty and other absurdities of the U.S. tax laws.

Fox teaches tax policy at Mount Holyoke College in South Hadley, Mass., and is the author of "If Americans Really Understood the Tax Code" and "10 Tax Questions the Candidates Don't Want You To Ask."

Here are excerpts from online conversations of taxpayers with Mr. Fox.


John O. Fox: Hi. I'm John Fox and am delighted to have this opportunity to chat with so many of you. My article touched off an incredible number of reactions. I have received about 90 emails so far from all over the country. Most people thanked me for standing up for the single person; the message from so many of you has been that you feel you have not had the respect you deserve just because you haven't married or had children. Some emails were very upset with me. They read my article as a criticism of tax relief for Fran and Bill, the couple with kids. I have asked them to reread the article because I was very clear to say that singles should not resent the fair treatment of Fran and Bill. Rather, singles have a right to ask that they too be allowed to have enough income to pay their basic expenses before they are taxed. Some emails insisted that I was single and therefore had no idea what it was like to be married. I let them know that I have been married for nearly 40 years and have two wonderful children, but I never thought that was reason to treat singles badly.

Some of you would like to know how to buy my book, 10 Tax Questions the Candidates Don't Want You to Ask. Go to my website, www.johnofox.com, where you can read about the book and, if you like, buy it.

Finally, some of you wanted to know my background. I practiced law in Washington, D.C. for 36 years, and specialized in tax matters. Since 1984, when my family and I moved to Amherst, I have worked part-time in my D.C. practiceuntil I retired at the end of 2001. Since 1985, I have been teaching an undergraduate course on U.S. tax policy called Winners and Losers at Mount Holyoke College.


Washington, D.C.: What REALLY burns me up about this is the assumption that I am single by choice and therefore should be penalized by paying higher taxes than someone who was fortunate enough to find someone they wanted to be married to and have/raise children with. Singles are already discriminated against in the workplace (my boss leaves every Monday at 4:30 p.m. because of Boy Scouts or Girl Scouts or something or other child-related) and I'm expected to stay here and hold the fort down despite what I may have planned.

John O. Fox: I have heard now from lots of people like you who feel the discrmination about being single. It has been there for decades. One of the reasons, and I believe it is the principal reason, is that singles as a group have poor voting records. They don't put pressure on the candidates to change the tax laws so that they are fairer to single people. I'm hoping this article will help generate some interest among singles to let candidates know that they care a lot where the candidates stand on this issue. My guess is that the candidates will begin to care to if they think their election may be in the balance.


Berthesda, Md.: I appreciated your column, being a long time single myself. But be prepared to take a lot of heat in this chat. In my years of singlehood, I have rarely seen a married person who doesn't think that they are entitled to more of everything, are morally superior, AND that singles are basically a lower form of life. In earlier Post chats, I have seen singles faulted for things like the moral depravity in our culture, and one poster on the Federal chat thought that single feds should pay for part of family medical insurance premiums! I agree that no one should be penalized for being married or single, but the reality is that our culture validates only those who couple up, especially those conservative Republicans. Thanks for giving concrete examples of the inequities in our tax system, but I think hell will freeze over before politicians acknowledge the unfairness to single people.

John O. Fox: You point out a disturbing trend that I believe is applicable to issues beyond the treatment (or mistreatment) of singles. From the emails I received that were critical of my article, so many assumed that I must be single in order to advocate the rights of singles. As you may have seen in my introductory remarks, I am married with two great kids, but never thought that was reason not to care about the welfare of seniors. It seems to me that we have been encouraged in recent years to care only about ourselves. Therefore, to advocate the rights of others becomes the exception. I hope this trend changes. We're all in this great nation together. And it seems crucial that we work together for a fairer tax system, and a fairer society, regardless of where we happen to stand on the income ladder.


Chicago, Ill.: I was just thinking about the unfairness of this when I was completing my taxes last weekend. The same amount of income would be taxed 25 percent less if a married couple were reporting it instead of me. That's crazy People should not have their marriages subsidized by the federal government. Because I choose to focus on my career and get married at an older age, I end up paying more in taxes. I keep hearing that single women are the key demographic in this year's election. Why hasn't this "Singles Penalty" issue been brought up yet? Why aren't more singles outraged? We keep hearing about the "marriage penalty" and reductions and credits for dependent children, but nothing about the higher rate of taxes that single people with no children pay. The government is in effect taxing my lifestyle choices and that infuriates me. My coworker is married with a child. He makes the same amount of money as I do. His wife chooses to stay home and not work, just as they as a couple chose to get married and procreate. Why should I pay more in taxes than my coworker? It's ludicrous. No one force his wife to stop working. No one forced them to have children and no one forced them to marry. Why should they financially benefit from their lifestyle choices? And why should I be penalized for mine? Actually, my real question is, why aren't single taxpayers LOUDLY voicing their outrage?

John O. Fox: You've hit it on the head. If singles rallied this year, letting the candidates know that they "won't take it any more," I'm confident you're going to get a lot more attention from the candidates and from the media. Singles have not banded together. Maybe some of you will create a website and begin to map a political strategy so that the media notice you as well as the candidates. I think it will work. Good luck!


Herndon, Va.: Dr. Fox: I'm married, but my family and I agree the whole tax code is out of whack. (We were hit for the first time this year by the AMT!) Rather than focus on specific inequities, shouldn't the entire federal income tax code be changed?

John O. Fox: The central argument of my first book, If Americans Really Understood the Income Tax (2001) was precisely that. I argued that both true conservatives and true liberals should demand that Congress get out of the business of micromanaging our economic decisions through the tax laws, and should also stop using the tax laws to reward certain forms of social behavior. In fact, about half of our individual income isn't taxed because of one tax relief measure or another. The consequence is a tax code that produces highly arbitrary results. People with equal abilities to pay rarely pay equally, and often people with much higher abilities to pay pay less. I believe our system should be reformed so that our tax burdens have much more to do with our ability to pay taxes than our ability to avoid them. What does this mean?

It means that Congress would retain only the most compelling tax relief measures, and, in return, it would greatly lower the tax rates of everyone. Most taxpayers would then pay a tax rate no greater than 10%, and people at the top wouldn't pay more than about 28%. In that case, we wouldn't have a homeownership tax subsidy where 22% of the tax savings went to the top 2% of all income earners, and only 3% of the tax savings went to the bottom half, as is true with the home mortgage interest deduction. If Congress than had to decide about subsidies for homeownership, it would be hard pressed, before the bright lights of a Congressional hearing, to tell the bottom half of all taxpayers that they would receive only 3% of the benefits. In short, social policies of the government would be much more transparent, and, I believe fairer, as would the income tax. And we could have greater respect for a tax code that is so central to our nation's destiny


Chicago, Ill.: There is no marriage penalty. Do we think that up to now the tax code was written to favor singles? The old saying that two can live as cheaply as one has a lot of truth in it. I think it recognized that married people didn't have to buy two refrigerators, sofas and stoves, etc. Married couples only need one kitchen, one bed, one television, one stereo, one carpet, etc. They only have to write one rent check, one check for homeowner's insurance, one phone bill, one electric bill, etc. A single person doesn't get to split these costs the way married people do. In truth there really is a singles penalty not a marriage penalty. Too bad critical thinking is rare among our politicians.

John O. Fox: One of the interesting aspects of a few emails that were critical of my article was the failure to recognize your point about economies of scale. One writer assumed that a family of 4, Fran and Bill with their two kids, automatically would have 4 times the expense of Bill. I pointed out to them, as you have indicated, why this wasn't so. Fran and Bill would not need an apartment or house 4 times as expensive as Fran's, they wouldn't need 4 refrigerators, 4 bathrooms, etc. Indeed, although I believe the poverty thresholds are too low, the government recognizes these economies of scale by setting the poverty threshold of a family of 4 at $19,000, only twice the poverty threshold of a single person.


Arlington, Va.: Doesn't your article mix apples and oranges by comparing the tax burden of a family of four to a single person? Many of the benefits accruing to the family are because of the various deductions and credits for dependent children. Wouldn't a better comparison be between a single person and a married couple, and between a single parent with two children and a married couple with two children? That way, the comparison would hold everything constant except for the taxpayer's status as a single or married indiviudal.

John O. Fox: Some others made a similar observation. They wanted to compare people whose lives were closer to Meg's life. My answer, however, is that I believe the comparison I made between Meg's situation and the family of 4 is entirely valid, although it would have been equally valid to make other comparisons such as the ones you mention. First of all, I wanted readers to understand that Meg could never pay her basic living expenses on $740 a month in most cities in the United States. Therefore, it was very unfair of Congress to begin taxing her at such a low level of income. Second, I wanted to make the point that Congress in fact ignores poverty thresholds for other groups, such as the family of four. I did this not because I thought that their lives were anything comparable to Meg's but to underscore that Congress had concluded that their poverty threshold was absurdly low for determining their income tax threshold. From this, I wanted to make the final point: that it made sense to treat them this way because they never could meet their basic costs at $19,000 a year; and Congress owed similar consideration to single taxpayers. Make sure they have enough income to pay their basic living expenses before taxing them, even if they have high incomes.
Now we could do a similar exercise with other groups, but the argument would be the same: everyone should be entitled to pay basic expenses before they pay an income tax. In fact, the single person is the only householder who is asked by Congress to pay an income tax on income that is close to their poverty threshold


College Park, Md.: It is defintely a discrimination by taxing rent. People who rent are usually poorer than those who can afford houses. For young people, rent is the only way they can choose.

And in many places such as the greater D.C. area, rent exceeds in most cases the monthly morgage payment for a house. If anyone who purchase a home can get a tax break, why not the person who rents? I think it is a much important matter and more easy to change legally than the overtax for singles. Maybe this is the issue which should be raised to the Congress.

John O. Fox: You've raised a very important issue. If the tax laws are going to make accomodations for the costs of owning a home, why not give a break to people who rent. In fact, as you say, renters as a group have far less income than do homeowners; and we know that rents as a percentage of the income of so many people are crippling.

Why not ask that of candidates? Of course, my preference, as I've indicated elsewhere, is to create a basic income tax threshold which makes sure that everyone, including renters, don't begin paying an income tax until they can put bread on the table, clothe themselves and their families, and meet other basic living costs. Then, we could simplify the tax laws because everyone would begin with this basic tax threshold, and Congress could limit further relief to situations which are only the most compeling. But then the marketing of tax breaks couldn't be the political football it has become.


What to itemize?: So singles don't itemize as much... I am a single who would like to start saving more receipts and better preparing to itemize next year. What kinds of things should I be saving? What's a good resource for a single person looking for simple strategies going into the next tax year?

John O. Fox: It's not so much saving receipts as having expenses that quaify for itemizing. By far the largest itemized deduction is the mortgage interst deduction. Congress allows the deduction on up to $1 million of loans to buy, build, or substantially improve a principal residence and/or a secondary residence. So, to begin with, if you rent, you will have difficulty having enough itemized deductions to make itemizing worthwhile. The other large deduction for homeowners is for property taxes. Here, they can deduct the property taxes on not only their principal home and a second home, but an endless number of vacation homes. You see, therefore, how Congress has been incredibly generous in helping homeowners who have the greatest ability to own homes without a federal subsidy.

Another large deduction is for state and local income taxes. Sales taxes are not deductible. So if you live in a state that depends upon a sales tax, and someone lives across the border in a state that depends upon an income tax, you are likely to pay more taxes than they do even though your income is identical and everything else about you is the same. The results, as you can see, are highly arbitrary, often very unfair, and economically inefficient. We need a major tax overhaul.


Virginia: You mentioned you teach tax. Do you mean you're a tax lawyer or an accountant?

John O. Fox: I mentioned in the introduction that I've been a tax lawyer for 36 years (I retired in 2001). I also taught a course at Catholic University's law school for many years on advanced estate and gift tax planning. I have a master's degree in taxation from Georgetown University.


Farragut Square, Washington, D.C.: The problem with the comparison in your article is that it ignores one of the implied goals of offering dependent deductions -- to keep children from living in abject poverty. While living expenses such as rent and utilities may not be significantly higher for a family of four as opposed to a single person, you better believe that health care costs, clothing, food, and day care more than make up for that difference. As a single person, I can get a second or third job to be able to cover my expenses. A single mother, or a couple with children would have to sacrifice time with a their children to do the same.

John O. Fox: Let me say that I am prepared to raise the tax threshold for a family of four if that is necessary to assure them a level of income to meet basic living costs. I assume you will agree,however, that Meg too deserves to be treated humanely, and that at $740 a month, or even several hundred dollars more, she can't make it in most places in this country. Let's make sure the tax threshold is fair for everyone. Also I should add this comment. I believe that we should try to have as many people as possible pay some income tax, because I think it becomes very troublesome if we were to look only to people with very high incomes to bear the entire burden. This means that we want to be careful in setting these tax thresholds.


Laytonsville, Md.: Isn't it married couples with an income disparity who really benefit? In particular, couples where one spouse does not work. My spouse and I both work and have comparable salaries. As a result, I believe that we pay more than we would if we were single.

John O. Fox: The rule of thumb is this: if one person has a high income, and the other has a low income or none at all, marriage will result in a marriage bonus. In other words, as you suggest, you will pay less income tax if you marry than if you remain single. If you both have high incomes, then you will pay some marriage penalty because you will pay more taxes if married then you pay collectively while single.

Having said that, the 2001 and subsequent legislation have flattened out the results to a large extent. Congress has now made the standard deduction for a married couple twice the standard deduction for a single person; before, the standard deduction for a married coulple was less than that. Congress also said that for people in the 10% and 15% brackets, there will be no difference. If you look at when married people move from the 10% to the 15% bracket, you will see that they have twice the taxable income of the single taxpayer. But once you head into higher brackets, the spread of the brackets for married couples is not twice the bracket for singles. So if you both have high incomes, you still face some penalty unless you earned hundreds of thousands of dollars, because then there is no penalty. Confused? Yes, the rules are confusing.

The most significant marriage penalty remains the penalty for low-income people with one or two children. If they marry, they can lose their entire earned income credit, which can involve thousands of dollars. They also can lose part of their child care credit. These losses represent a significant percentage of their incomes.


Washington, D.C.: I read your article with interest and agree with it completely!

I was just curious: do you think that singles are not speaking out because they hope to be married soon, and don't want to spend the time fighting for something they won't need in a few years time? With all the focus on how people need to be part of couple to be counted (and not just in terms of taxes, but in everything!) it seems possible.


John O. Fox: I don't know,but you may be absolutely right for those singles who see themselves as getting married in the not-too distant future. In fact, one of the most interesting public opinion polls demonstrates the proposition you are suggesting, but in this case with relation to the estate tax.

Only 2% of all estates pay estate taxes; and now with estates being entitled to much higher exemptions, the percentage is likely to fall closer to 1%. The exemption currently is $1.5 million per estate, which means that a husband and wife can leave $3 million to their children or others without tax. Very few people have such estates. But there is little outrage at the prospect that in 2010, Congress has said that there will be no estate tax. Why no outrage?

In 2000, during the Bush-Gore race, one poll asked a lot of people if they were in the top 1% of all income earners. 20% of those polled said yes. Those who said no were asked this question: if you're not in the top 1% now, do you expect to be some day. 19% said yes. This means that in 2000, 39% of the people who were polled thought they either were in the top 1% or would be. That may explain why so few favor the estate tax. Some day it will apply to them, right? Wrong, unless they are among the 2% (or maybe just 1%) of the largest wealth owners.


Haymarket, Va.: The main source of the inequity between single (and childless married) taxpayers is the $1,000 child tax credit. Why should the 75 percent of taxpayers without children subsidize the raising and educating other peoples children? It was their choice to have children, so why shouldn't they bear the cost of raising them? In my opinion, the child tax credit is grossly unfair. The press always refers to the "popular child tax credit". While it is certainly popular with those who receive the credit, it isn't popular with those like me whose taxes are comparatively higher because of it. Am I wrong, and if so, how?

John O. Fox: You have raised a central question, and one that many people raised with me. To what extent should people without children be helping to subsidize families with chilren? We need to talk about this a lot more. Let me suggest a few guiding principles that I believe should apply.

The first principle is that we should discourage everyone from having children who cannot support them. This means, at a minimum, to discourage children in high school from having children. It also means that we want people to get out in the world and earn a living and gain some additional maturity before they have children.

That having been said, I believe we're all in this together. I fear the growing trend that we're supposed to just look after ourselves. We are one nation, and we are divided into many communities. And if we lose our sense of community, then we will have transformed this democracy forever. Furthermore, even if we don't have children in public schools, for example, we benefit from living in a community with good public schools. Those children grow up to be good, productive citizens, and we all gain from that. And there is the obvious fact that we need to have children for our society to continue. In sum, then, we want to encourage people to be self-sufficient before they have children. But we all need to participate in the life and welfare of our community, which means often paying taxes to help others. We need to do this, however, very thoughtfully. And I don't believe we have begun to have real conversations that are needed on this very complicated subject.


John O. Fox: Our time is up. Hope this has been helpful. My best to you all. Thanks for tuning in. John Fox




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