News / USA

Gay Marriage Rights Could Mean Higher Taxes in US

Terry Gilbert, left, kisses his husband Paul Beppler after wedding at Seattle City Hall, becoming among the first gay couples to legally wed in the state, December 9, 2012.
Terry Gilbert, left, kisses his husband Paul Beppler after wedding at Seattle City Hall, becoming among the first gay couples to legally wed in the state, December 9, 2012.
Reuters
If the U.S. Supreme Court strikes down a federal law defining marriage as between a man and woman, the newfound rights for gay married couples may bear something not so welcome - a bigger tax burden.

That's because with equality, gay couples will face the same tax woes of many heterosexual couples with similar incomes, including the tax hit known in America as the marriage penalty.

Taxpayers filing as married couples may be forced to pay higher taxes as their collective income crosses into a higher tax bracket sooner than if they were filing separately.

Oral arguments on Wednesday gave gay marriage backers hope the court would overturn the 1996 Defense of Marriage Act (DOMA) after a majority of the nine justices raised concerns about the law's validity under the U.S. Constitution.

Taxes are at the very heart of the challenge to DOMA.

Plaintiff Edith Windsor of New York, speaks to reporters in Washington, March 27, 2013Plaintiff Edith Windsor of New York, speaks to reporters in Washington, March 27, 2013
x
Plaintiff Edith Windsor of New York, speaks to reporters in Washington, March 27, 2013
Plaintiff Edith Windsor of New York, speaks to reporters in Washington, March 27, 2013
The case involves Edith Windsor and Thea Spyer, a New York couple. When Spyer died in 2009, DOMA prevented Windsor from enjoying one of the biggest tax breaks enjoyed by heterosexual Americans - the exemption from federal estate tax on wealth passed from one spouse to another.

If the law is struck down, the ruling extending the exemption to gay and lesbian surviving spouses would also clear the way to more than 1,100 federal benefits, rights and burdens linked to marriage status.

Cynthia Leachmoore, a tax preparer in Soquel, California, has about 40 same-sex married couples as customers ranging from teachers to Silicon Valley workers. A handful of them have joint incomes that top $1 million.

They're facing $25,000 to $30,000 more in federal and state taxes if DOMA goes down and they file taxes jointly, she said.``Most of them don't care. They'd really like to be able to say that they were married'' on tax returns, Leachmoore said. "That's more important to them.''

Complications

Married gay couples would see other benefits, including a break in taxes now paid on health insurance and greater access to federal family and medical leave.

There are some 130,000 same-sex married couples in the United States as estimated by the Census Bureau, and nearly 650,000 same-sex couples, married and not, in total.

The Byzantine U.S. tax code's marriage definition is not consistent. In some sections, the marriage provisions are defined for a "husband and wife.'' Other places say "spouse.''

If the law is struck down, the Internal Revenue Service may need Congress to clarify the tax code, or the Obama administration may say same-sex married couples will be treated the same as opposite-sex marriages, said Annette Nellen, a tax professor at San Jose State University.

Good for tax coffers

The nonpartisan Congressional Budget Office in 2004 estimated that recognition of gay marriage would, on net, help the budget's bottom line by $1 billion a year over 10 years. The increased revenue would account for about 0.1 percent of total federal revenues at the time.

Supporters of gay marriage hold a banner as they rally in front of the Supreme Court in Washington, March 27, 2013.Supporters of gay marriage hold a banner as they rally in front of the Supreme Court in Washington, March 27, 2013.
x
Supporters of gay marriage hold a banner as they rally in front of the Supreme Court in Washington, March 27, 2013.
Supporters of gay marriage hold a banner as they rally in front of the Supreme Court in Washington, March 27, 2013.
​The Williams Institute, a unit of the University of California at Los Angeles School of Law, estimates that gay marriage may be good also for the fiscal health of states and localities that legalize it.

Of the 50 states, 31 have constitutional amendments banning gay marriage. It is legal in nine states and Washington, D.C. The remaining states' policies vary, with some recognizing marriage from other states, some providing some of the legal benefits of marriage and others denying marriage by state laws.
    
Williams Institute estimated that if Rhode Island legalized marriage, its coffers would gain $1.2 million in 2010 dollars over three years, largely due to lower spending on social welfare programs and increased income tax revenue and marriage license fees.

That is the small slice of the hundreds of millions in operating deficits Rhode Island is expected to be working under in the next five years, as estimated by a governor's report.

Because of differing state laws, it is unclear what the impact might be in states with laws disallowing gay marriage.

Brian Moulton, an attorney with the Human Rights Campaign, said that if he married legally in Washington, D.C., and moved to Oklahoma, where gay marriage is not legal, the federal government might still recognize the union.

But Todd Solomon, a partner at law firm McDermott Will & Emery and author of a book on domestic partner benefits, said he was not so sure that would be the case.

"It is an open question as to what happens in Oklahoma,'' he said. "Each state will still be allowed to legislate marriage.''

Income, estate, health taxes

Although the case was about the estate tax, only 3,600 estates owed the estate tax in 2012, according to government figures, and the wealthiest Americans pay most of it.
    
The end of DOMA might also save same-sex couples from having to pay some federal taxes on healthcare benefits they receive through a spouse's employer. Unmarried domestic partners on average owe an extra $1,000 annually in taxes on these benefits because they are now taxed, according to Williams.

"Everyone will get a benefit if they were carrying health insurance," said Nanette Lee Miller, head of non-traditional family practice at accounting firm Marcum LLP in San Francisco.

The impact on Social Security benefits will be mixed. DOMA prevents same sex couples from claiming the survivors benefits extended to married couples. But Social Security recipients might face greater taxes on their benefits because they will hit the level where the benefits begin to be taxed sooner if married.

You May Like

Could Nemtsov Threaten Putin in Death as in Life?

Dynamic and debonair opposition leader had supported liberal economic reforms, criticized Russian president's aggression in Ukraine More

Oil Smuggling Highlights Challenges in Shutting Down IS Finances

Pentagon spokesman says Islamic State 'certainly continues to get revenue from the oil industry black market' but that airstrikes have made a dent More

India Focuses on Infrastructure, Investment to Propel Economy

Government expects economy to grow at 8 to 8.5 percent in next fiscal year More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
US Supreme Court Hears Hijab Discrimination Casei
X
Katherine Gypson
February 25, 2015 11:30 PM
The U.S. Supreme Court has heard opening arguments in a workplace religious discrimination case that examines whether a clothing store can refuse to hire a young woman for wearing the headscarf she says is a symbol of her Muslim faith. Katherine Gypson reports from the Supreme Court.
Video

Video US Supreme Court Hears Hijab Discrimination Case

The U.S. Supreme Court has heard opening arguments in a workplace religious discrimination case that examines whether a clothing store can refuse to hire a young woman for wearing the headscarf she says is a symbol of her Muslim faith. Katherine Gypson reports from the Supreme Court.
Video

Video Falling Gas Prices Hurt Nascent Illinois Hydraulic Fracturing Industry

Falling oil prices are helping consumers purchase cheaper petroleum at the pump. But that’s made hydraulic fracturing or “fracking” less economically viable for the companies in the United States invested in the process. VOA’s Kane Farabaugh reports on one Midwestern town that was hoping to change its fortunes by cashing in on the next big U.S. oil boom.
Video

Video Fighting in Sudan's South Kordofan Fuels Mass Displacement

Heavy fighting in Sudan's South Kordofan state is causing hundreds of thousands to flee into uncertain conditions. Local aid organizations estimate as many as 400,000 civilians have been internally displaced since the conflict began more than three years ago, while another 250,000 have fled across the border to refugee camps in South Sudan. VOA's Adam Bailes reports.
Video

Video Lao Dam Project Runs Into Opposition

A Lao dam project on a section of the Mekong River is drawing opposition from local fishermen, international environmental groups and neighboring countries. VOA's Say Mony visited the region to investigate the concerns. Colin Lovett narrates.
Video

Video A Filmmaker Discovers Her Biracial Identity in "Little White Lie

Lacey Schwartz grew up in an upper middle-class Jewish family, in a town in upstate New York where almost everyone she knew was white. She assumed that she was, as well. Her recent documentary, Little White Lie, tells the story of how she uncovered the secret of her true racial background. VOA’s Carolyn Weaver has more on the film.
Video

Video Deep Under Antarctic Ice Sheet, Life!

With the end of summer in the Southern hemisphere, the Antarctic research season is over. Scientists from Northern Illinois University are back in their laboratory after a 3-month expedition on the Ross Ice Shelf, the world’s largest floating ice sheet. As VOA’s Rosanne Skirble reports, they hope to find clues to explain the dynamics of the rapidly melting ice and its impact on sea level rise.
Video

Video US-Cuba Normalization Talks Resume Friday

Negotiations aimed at normalizing diplomatic relations between the U.S. and Cuba resume Friday. On the table: lifting a half-century trade embargo and easing banking and travel restrictions. There's opposition in Congress, but some analysts say there may be sufficient political and economic incentives in both nations for a potential breakthrough this year. VOA's Mil Arcega reports.
Video

Video Pakistan's Deadline For SIM Registration Has Cellphone Users Scrambling

Pakistani cell phone users have until midnight Thursday to register their SIM cards, or their service will be cut off. While some privacy experts worry about government intrusion, many Pakistanis are just worried about keeping their phone lines open. VOA Deewa reporter Arshad Muhmand has more from Peshawar.
Video

Video Myanmar Warns Factory Workers to End Strikes

Outside Myanmar's main city Yangon, thousands of workers walked off their jobs earlier this month demanding a doubling of their wages, pay raises after a year and input from labor unions on industrial regulations. Since Friday, the standoff has grown more tense as police moved in to disrupt the sit-ins, resulting in clashes that injured people from both sides. VOA correspondent Steve Herman visited industrial zones which have become a focus of Myanmar's fledgling workers rights movement.
Video

Video Oscar Winners Do More Than Thank the Academy

The Academy Awards presentation is Hollywood’s night to reward the best movies from the previous year. It’s typically a lot of glitter, a lot of thank you’s, a lot of speeches. But many of this year’s speeches carried messages beyond the thank you's. VOA’s Carolyn Presutti takes a look.

All About America

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More