Assessing Marriage Penalties or Bonuses

It is surprisingly difficult to measure marriage penalties and bonuses. The measure of the marriage penaltyrequires a counterfactual: what would the combinedtaxes of the two spouses be if they were not married? Unfortunately, there is no simple answer to this questionbecause marriage itself tends to be a life-changingevent. Indeed, the answer may be different if the question is: "What would the tax be if the spouses had nevermarried?" rather than "What would the tax be if thecouple divorced?" These issues become much more important for certain types of married couples. Most coupleswould not have had children without marriage,and having children can dramatically reduce tax liability. In divorce, who gets custody of children can alter taxliability. Never marrying would probably alsohave altered career paths (and thus the amount of earned income of each partner), savings behavior (and thus theamount of unearned income), the allocation ofsavings and consumption into different types (including tax exempt forms such as owner occupied housing that alsotend to affect the choices of itemizingdeductions). Getting divorced would probably also alter these effects, unless the divorce were solely for purposesof tax minimization. 
The decision about how to measure the marriage penalty does not alter the effects of the two proposals (which are still determined with reference to the marriedcouple's joint circumstances), but rather the original magnitude and remaining magnitude. 
In the next section we calculate the marriage penalty in general for couples without considering the effects of children, where there is much less uncertainty abouthow to measure the penalty. The following section discusses the issues surrounding marriage penalties for couples. 

	Marriage Penalties and Bonuses: Couples Without Children

Despite all of the attention focused on marriage penalties, it may be surprising to know that for the middle class,marriage penalties are small or nonexistent,particularly in cases where the penalty is well-defined. According to data from the Internal Revenue ServiceStatistics of Income, about 60% of joint returns thathave tax liability before credits paid taxes at the 15% rate in 1997; for these taxpayers, the marriage penalty can beno larger than $225 (measured at 2001 incomelevels). For taxpayers who itemize and whose itemized deductions are at least as large as the combined standarddeduction for two singles, no penalty exists at all. 

		Marriage Penalties for the "Middle Class"

The "middle class" is typically defined very broadly and in this section we discuss effects that cover taxpayers with marginal tax rates of 15% (covering 60% oftaxable returns and 51-52% of all returns) and with marginal tax rates of 28% (covering 26.2% of taxable returnsand 23% of all returns). Overall this broad rangecovers all but the bottom 12-14% of returns that have a zero marginal tax rate and the top 12% or so. (For thebottom, the 12% refers to no liability before creditsand the 14% with no liability after credits; since the earned income credit, but not other credits is refundable, thenumber with a zero marginal tax rate falls inbetween.) Thus, roughly speaking, these taxpayers represent the broad range of the middle three quarters of thedistribution of joint returns. 
The following examples, based on 2001 income levels, assume that all income is taxable, and assume a constant rule for the choice of itemizing deductions, sothere is a switch at the point of itemizing. Note that these assumptions overstate the marriage penalty as a fractionof economic income, particularly at the top andbottom of the distribution. At these ends of the distribution, untaxed or preferentially taxed income (transferpayments at the lower end and capital gains anduntaxed income, such as tax exempt interest at the higher end) is common. The middle class also has higher incomesthan adjusted gross income indicates,primarily due to untaxed fringe benefits. Note also that the marriage penalties assume evenly divided income wheremarriage penalties are usually at theirmaximum, especially at higher levels of income. (2)
Table 1 shows the marriage penalties from the regular income tax for returns falling in the 15% bracket, representing slightly more than the bottom two thirds ofour "middle class." (It excludes the earned income credit (EIC).) These returns assume income is evenly splitbetween the couples. The income points are chosento show peaks and valleys of the penalty as a percentage of income. The highest level of the marriage penalty asa share of income is reached at the exempt levelfor singles, $14,900 in 2001. But for most joint returns, the marriage penalty is relatively small. Both the secondearner credit, and lower rates, in theAdministration proposal would reduce the marriage penalty (and in cases where taxpayers itemize, turn it into abonus). H.R. 6 would eliminate thepenalty, as would optional filing.
Table 2 shows the maximum marriage penalties for returns falling in the current 28% bracket. These returns can be affected by the width of the 15% bracket aswell as the standard deduction, and their marriage penalties peak at about 1.6% of income (again, assuming thatincomes are evenly divided). 
 Table 1: Marriage Penalty as a Percentage of Income, Returns in the 15% Tax Bracket, No Children (ExcludesEIC)
Note: Assumes income is evenly split. Assumes itemized deductions at 18.8 % of income. 60% of joint returns with tax liability fell in the 15% bracket in 1997.Note that equally divided incomes can produce smaller penalties or larger bonuses under the Administrationproposal because of the second earner deduction. With incomes divided in a way to create the full penalty under current law and minimize the second earnerdeduction the penalty would be 0.4% at $21,240 and $30,000, and 0.3% at $40,425, but would become a bonus of -0.2% at $48,404 and then gradually decline in value. 
 Table 2: Marriage Penalty As a Percentage of Income, Even Earnings Split, Returns in the 28% Bracket, NoChildren
Note: Maximum marriage penalty assumes income is evenly split. Assumes itemized deductions at 18.8 % ofincome. 26% of joint returns fell in the 28%bracket in 1997.
H.R. 6 is designed to eliminate the marriage penalty arising from standard deductions and rate brackets, so the penalty is zero in each case. However,the administration proposal virtually eliminates the penalty as well. For the 15% bracket, the peak of the penaltyas a percentage of income comes just as thetaxable level for two singles is reached ($14,900). At this point, the current marriage penalty of $225 is 1.5% of income. The lower rates of 10% for the first$12,000 of taxable income reduce the penalty to $150 and the second earner deduction reduces it further, to $75. As the second earner deduction increases, andthe likelihood of itemizing deductions increases, there is actually a net benefit. Optional filing would also eliminatepenalties.
Because the second earner deduction is actually larger the more evenly divided incomes are, there could be a smaller effect, as noted in the footnote to Table 1. Regardless of how it is calculated, however, it is clear that the Administration proposal virtually eliminates thesmall marriage penalty that currently exists.
The same is true of the 28% bracket shown in Table 2. The maximum marriage penalty as a percentage of income is reached at the top of the 28% bracket for twosingles (and income of $73,768). This penalty is reduced by the second earner deduction until it is only 2/10 of apercent of income. Again, H.R. 6 in most cases eliminates the marriage penalty, although it does not do so entirely because of the phase outs ofitemized deductions and personal exemptions thatbegin at $132.750. 
When looking at the marriage penalty, therefore, it is clear that both the Administration proposal and H.R. 6 are approaches that eliminate or virtuallyeliminate these middle class marriage penalties, with H.R. 6 being more precise, but with the Administrationproposal being quite successful.
The more important differences arise from the effects of the two proposals on marriage bonuses. Table 3 illustrates the marriage bonus (at its maximum) for therelatively common case of the one-earner family. As this table illustrates, marriage bonuses tend to be larger thanpenalties, and are a significant fraction ofincome. Bonuses begin at the exempt level for a single individual. Bonuses reflect both the higher standarddeduction for joint returns compared to a singleindividual, as well as the additional personal exemption associated with the non-earning spouse. 
The Administration proposal and its rate cuts lower the marriage bonus at very low income levels, because it lowers the rates from 15% to 10%. However, theproposal creates a new type of bonus because the new 10% rate bracket is twice as wide for joint returns as forsingles, a feature that may have been chosen toavoid increasing the marriage penalty. This new bracket, in fact, follows the general approach used in H.R. 6 , but limited to the new 10% bracket. Inthis income category, however, H.R. 6 increases the marriage bonus at lower and moderate income levels onlybecause it increases the standarddeduction. Hence at the points where deductions are itemized, H.R. 6 has smaller bonuses than theAdministration proposal. Optional filing, ofcourse, would not affect bonuses.
In addition to the comparison of H.R. 6 and the Administration proposal, a fourth column has been added calculating the effects of combining H.R. 3 and H.R. 6 , that is, keeping the rate structure of the Administration proposal but altering thestandard deduction and 15% ratebracket to make them double the width of the single bracket. These results indicate that choosing this approach,given the rate structure, would lead to higherbonuses than those with the second earner deduction and higher bonuses than in present law in many cases. 
Table 4 shows the one-earner bonus for returns in the 28% bracket. In this case the bonuses tend to be smaller for the Administration proposal than either forcurrent law, or for H.R. 6 . That effect occurs because of the lower rate, 25%, which offsets the effect of the10% bracket H.R. 6 ,however, expands the bonus because it increases the 15% rate bracket for married couples to twice that of singles. 
 Table 3: One Earner Marriage Bonus as a Percentage of Income, Returns in the 15% Bracket, NoChildren
 Table 4: One Earner Marriage Bonus as a Percentage of Income,Returns in the 28% Bracket, NoChildren
Note: Assumes itemized deductions at 18.8 % of income. 26% of joint returns fell in the 28% bracket in 1997.

		Lower Income Couples and the Earned Income Credit

For lower income individuals, the tax system still has an impact through the earned income credit, and marriage penalties can arise from this system as twoindividuals who marry can be phased out of the EIC. For example, a married couple without children with equalearnings and total income at the filing thresholdwould have a marriage penalty of 4.6% of income due to the phase-out of the EIC. Of course, an equal split at theselow combined income levels would implyvery low annual earnings, probably reflecting part time work. These measures would, however, be much larger inthe case of couples with children where the EICis much larger.
Marriage bonuses can also occur with the EIC, if an individual without children and earnings marries someone with children and little or no earnings. 
None of the proposals includes significant changes in the earned income tax credit. H.R. 6 has a percentage increase in the earned income tax creditfor joint returns as compared to single and head of household, while the bill that passed last year increased thephase-out threshold by $2,000. (The final billincluded an increase in the phase-out threshold of $3,000). These proposals would not have very large effects, andboth would increase bonuses slightly whilereducing penalties slightly. 
This decision may reflect in part how difficult it is to address the marriage penalty in the case of the EIC where targeting poor families via their total income isparamount. If we simply allowed even the most targeted of the proposals, optional filing, and even ignoring theconsequences of children, we could find coupleswith very large incomes becoming eligible for the EIC. (A similar point could be made for an additional "secondearners" credit.) For example, a family with acombined income of $100,000 where one spouse earned a low salary (say $8,000) would be eligible for the EICwhich does not phase out until slightly over$10,000. This issue would become even more complicated given the larger EICs with children, where the phase outends at slightly over $28,000 for one child and$32,000 for two children. Thus, relatively wealthy families could become eligible for the EIC.
Nor do the alternatives become more palatable. To double the phase out points of the EIC, using the same approach as H.R. 6 for marriage penaltyrelief in the regular income tax system, would mean that families with children and with $60,000 or more wouldbe eligible for the credit. Nor is the approach ofincreasing the credit itself very effective, since the problem is the phase out and not the level of the credit. 

		Higher Income Couples

Higher income couples, representing the top 12-13% of the income distribution, present their own problems in assessing the marriage penalty, even in the absenceof children. First, as incomes increase, the possibility of excluded income and of capital gains income taxed at flatrates increases. For couples in the 15% bracketabout 3% of income is from capital gains; for couples in the 28% bracket perhaps 6% to 10% of income is fromcapital gains (based on the closest matches toincome categories). At higher income categories, the share that was in capital gains rises to 20%, 30% and 60% ofincome. In 1997, half of the individuals in thisupper part of the distribution had a top marginal tax rate that was due to capital gains. Any penalties that arise fromexisting law would, therefore, be lower as apercentage of income than the penalties listed in table 2, and hence effectively eliminated by either approach for halfof these taxpayers.
Secondly, problems about the division of non-wage and unearned income become more important, particularly at the very high end. Adjusted gross income rangesfrom $141,000 to $171,000 for the 31% bracket, and up to $368,000 for the 36% bracket. While about 80% ofincome in the $50,000 to $100,000 class is fromwages, only 70% of the $100,000 to $200,000 class is from wages, and the share declines until it reaches less than30% for income over $1,000,000. 
In addition, an equal distribution, or even close to equal, distribution of income between the spouses becomes much less likely in the upper end of the distribution,so that illustrations based on even incomes would be much less representative of typical two earner couples. Thus,while calculations of bonuses might be morerealistic, calculations of penalties would be misleading.
Despite these uncertainties that make illustrative examples problematic, it is clear that the penalties in most of these higher income categories are not very large,and will decline. For the 31% bracket, which includes about 3.3% of joint returns, the maximum penaltiesassuming even division of income and full taxabilitybegin at about 0.9% of income, rise to a peak of 1.3% and then fall to 1.2% at the top of the bracket; theadministration proposal will reduce those penalties to0.3%, largely because the former 28% and 31% brackets are now combined into a single 25% bracket. Most of thepenalty that would now apply in this group isdue to the itemized deduction phase out and not rate brackets. (A proposal by Senate Finance Committee ChairmanGrassley and Ranking Member Baucus wouldmake the former 31% bracket subject to a 28% rate, however, which would restore the marriage penalty effectbecause it reflects the differences in the two rates. The same proposal, however, would increase the itemized deduction phase-out start point, reducing the penalty andalso includes the H.R. 6 proposals). H.R. 6 would actually leave slightly larger penalties than the Administration proposal in manycases, beginning at 0.1% but rising fairlyquickly, with a peak of 0 .7%, then declining to 0.6%. These penalties occur because the other brackets are notcorrected; penalties would be quite similar tothose in the Administration proposal, however, if H.R. 6 were combined with H.R. 3 . Bonuses wouldalso be reduced by theAdministration proposal in general, and would be increased by H.R. 6 . 
At higher levels, penalties would remain, although they will be reduced by both bills, but these remaining taxpayers account for only 3% of taxpayers. 

	Couples with Children

As noted in the previous section, couples with children present serious problems in modeling marriage penaltiesand bonuses. The presence of children in ahousehold can dramatically alter tax liabilities. Children justify a head of household rate schedule which has widerbrackets than the single return, implying alarger penalty and smaller bonus as compared to joint return than would be the case in comparing single and jointreturns. Children increase personal exemptionsand, if under 17, make the taxpayer eligible for a child credit. Earned income credits, which reach much further upthe income brackets and are much larger,accrue with children. Thus, how children are divided between the spouses can have profound consequences for taxliability. 

		Methods of Allocation

At least five potential ways of allocating children's tax consequences might be considered and several have been specifically used in studies. Some of them aremost plausible when thinking of a married couple divorcing rather than never marrying; others are most plausiblewhen thinking of a couple never marrying. 
(1) The Tax Minimization Model. This model assumes that the children are allocated in a way that minimizes tax liability. If a couple has two children and hassimilar incomes, for example, each would take custody of one of the children and move to a separate household sothat both could obtain head-of-householdstatus. This was the basic approach used initially in the economics literature and by the Congressional BudgetOffice in its study of the marriage penalty. (3) Thischoice tends to lead to the largest measures of penalties and the smallest measure of bonuses. Obviously, as anoptimization strategy, this approach has someshortcomings because it requires not only the emotional and social costs of a sham divorce but also increasedeconomic costs (maintenance of two households) toachieve tax minimization. Except for very high income taxpayers, such a strategy would be unlikely to be followed. 
(2) Resource Pooling Tax Minimization Model. This model, developed by Treasury, assumes that taxminimization is modified to keep economic costsunchanged, so that divorced individuals continue to share the same household and otherwise maintain theireconomic relationships; i.e. they would be unmarriedcohabitators. (4) Only one parent (the one with thehighest income) would be able to claim head of household status. 
(3) Divorce Model. This model, used as an alternative by both Treasury and CBO, would allocate children in a way typical of most divorces, where the childrenare allocated to the lesser earning spouse (who is typically the mother). Treasury finds that this model produces anaggregate $28.9 billion net bonus for allcouples, compared to the $1.6 billion net penalty they find in their tax minimization model.
(4) Ignore Head of Household Status. In this view, head of household status may be seen as a specialdispensation to help single parents and should not beviewed as the standard against which to measure the marriage penalty. The allocation of children (and their personalexemptions and credits) would still matterfor measuring bonuses and also for measuring penalties where incomes tend to be disparate. One might say thisview is implicit in H.R. 6 and othercongressional proposals where the changes are made to match the single return, not the head of household return. A similar argument might be made for childcredits. 
(5) Ignore Children. This view would argue that the counterfactual for most couples would be that they would not have had children had they not married. In thiscase the marriage penalties and bonuses would be the same as in the previous section, except there might berecognition that married couples with children willnot have tax liabilities at higher incomes. 
Because it is impossible to assess these bonuses we do not present tables of penalties and bonuses as we did for single individuals, and it is impossible to makegeneral observations. Nor is it easy to choose a model, in large part because the rationale for the concern about themarriage penalty. In the next section, however,we suggest that common rationales for concern about the marriage penalty would suggest a focus on lower incomeindividuals and then discuss the parameters ofthese bonuses and penalties under various alternatives.

		Rationales for Concern About the Marriage Penalty

As noted at the end of the previous section, part of the uncertainty surrounding the measurement of a marriage penalty is that the reason for being concerned aboutthe penalty has not been clearly articulated. There are two potential reasons to be concerned about the marriagepenalty: fairness and incentives. 
If the marriage penalty is a case of concern about fairness, then there is a trade-off. There is considerable evidence to suggest that married couples are alreadybeing taxed somewhat more lightly than singles with the same ability to pay, but that in general the system isrelatively even handed. (5) (Families with children aretreated more generously whether headed by married couples or singles.) Thus, any unfairness in the marriagepenalty must arise from the comparison of marriedcouples with cohabitating couples. However, the numbers of these latter groups are very small. According to March1998 Census data, there were 197 millionpeople over 18, and 110 million were married. However, of the 87 million unmarried individuals (some nevermarried, some widowed, and some divorced) onlyabout 8.5 million were living with unmarried partners of the opposite sex. Thus, at most one would be increasinginequities between the 110 million marriedcouples and the slightly under 80 million single individuals, in order to more evenly treat the 110 million relativeto the 8.5 million. Such a fairness argumentdoes not hold up well, especially since some married couples, in fact a significant fraction, receive a bonus frombeing married. Using a "divorce" model(discussed above), CBO found that 37% of married couples have penalties and 60% have bonuses. Thus, simplylowering tax rates for joint returns wouldprobably magnify the existing average favorable treatment of married couples relative to cohabitatingindividuals. It would stress the pursuit of "fairness"between a minority of married couples and a tiny minority of singles, at the cost in increasing the discrepanciesbetween much larger groups. 
Another reason to be concerned about the marriage penalty is the incentive structure which, again, may cause individuals to cohabitate rather than marry. Thisconcern may be more legitimate, but it is probably of much greater importance for certain types of couples. Ofcourse, the relatively small number of cohabitatingcouples, and the fact that most of them are probably cohabitating for reasons other than tax consequences suggestthat not very many people are discouraged frommarriage or encouraged to engage in a divorce, because of the tax consequences. In particular, it is likely that mostmiddle income individuals would not see thefinancial incentives as large enough to divorce, and that the presence of children, in particular, would make thatoutcome less likely. 
The characteristics of cohabitating couples also differ from those of married couples in general. About half of married couples have children, but only about athird of cohabitating couples have children; cohabitating couples tend to be relatively young. While no data directlyreport the poverty rates among this group, it islikely that a larger fraction of families with children is not subject to regular income tax liability. These familieswould file tax returns as heads of households orsingles, and the fraction of these groups, particularly heads of household, that do not pay taxes, is higher than in thecase of singles. In 1997, about 35% of head ofhousehold returns had no tax liability before credits, while only 12% of joint returns had no tax liability; 21% ofsingle returns had no tax liability. 
Data on child poverty are also instructive. In a study that focused on cohabitating couples based on the 1990 census, the poverty rate even after taking intoaccount earnings of both partners was 26.9%, compared to a poverty rate of 5.8% for children whose parents aremarried. (6) If even for those not in poverty, alarge fraction of these families tended not to be much above the poverty line. Another 19% of children would beclassified as poor by considering only one of thepartners, and when income was combined, the average income was only 1.75 times the poverty line. Since thecurrent tax system excludes families with childrenwell above the poverty line from tax and since public assistance received by these families and counted as incomewould not be taxable, it is likely that asignificant fraction of these families do not incur a regular income tax liability.
These data do suggest that if our concern is about a comparison to cohabitating couples, there are two important groups: couples, mostly young, who do not havechildren and, in the case of couples with children, mostly lower income couples. 
The Administration proposal will further remove these families with children from concerns about the tax system, because of the lower rate of 10% and theincreased child credit. Under current law, a family with one child would have no tax liability until income reached$19,633 (assuming that all income is taxable);a family with two children would not have tax liability until income reached $25,866. Under the Administrationproposal, with the larger child credit, theseamounts will rise to $27,684 and $38,456, amounts close to the poverty level, and closer to the income levels whereitemized deductions tend to displace standarddeductions. Thus, a marriage penalty or bonus will be feasible for only a small slice of families in the 15% bracketwhose incomes are high enough to be taxablebut who do not itemize. And even in this case, considering the head-of-household schedule for one of the spouses,the marriage penalty can be no larger than$540. Looking at maximum values, for a $30,000 couple, the penalty would be 1.8%, which would be reduced to$220 (0.7% of income) by the Administrationproposal and to $315 (1.1%) under H.R. 6 . These amounts will decrease as incomes rise and, again, becomesubsidies for itemizers. These taxpayers,along with those with no liability, account for approximately the bottom two-thirds of the joint returns. 
These couples may experience a penalty due to the earned income credit, but, as noted earlier, none of the proposals are really focused on the EIC and it is difficultto devise a way of correcting for marriage penalties without undermining much of the purpose of the EIC. Andhigher income individuals are not particularlycomparable to most cohabitating couples with children. 

	Conclusion

This analysis of the effects of legislative proposals on the marriage penalty indicates that for the middle class,the marriage penalty, which is already relativelysmall, will be essentially removed by the rate reductions and second earner exemptions in the administrationproposal, capturing essentially the same penaltyelimination objective of the original marriage penalty legislative proposals in the previous Congress. The proposalwill also reduce marriage penalties in thehigher brackets by a larger amount than H.R. 6 standing alone. This result is a natural outcome of the ratereduction and flattening in the President'sproposal, and explains why marriage penalty relief in the form of a second earner deduction was eliminated whenrate were flattened in 1986. 
H.R. 6 , the congressional marriage penalty proposal, would, however, increase existing marriage bonuses, while the administration proposal wouldreduce them. H.R. 6 combined with the rate cuts and credits portion of the proposal passed by the House as H.R. 3 would increasemarriage bonuses compared to the Administration proposal with the second earner deduction, and in many caseswould increase bonuses compared with currentlaw. Since the final bill included rates cuts similar to those in H.R. 3 , there will be some increase in marriagebonuses, but since the top rates werenot cut as much there will be less reduction in the bonuses at higher income levels.

Summary:
President Bush's tax proposal and H.R. 6 (passed by the House) have different approaches to the marriage penalty. The Administration proposal, inaddition to rate changes, has a second-earner deduction for 10% of income (up to $30,000) earned by the lowerearning spouse. H.R. 6 wouldincrease the standard deduction and width of the 15% rate bracket for joint returns to twice the size of singles,eliminating the penalties for taxpayers in the 15%and 28% brackets but adding to any marriage bonuses. This report compares these alternative proposals. ( H.R. 1836 , signed by the President on June7, includes these latter proposals along with rate cuts).
Taxes can go up or down as a result of marriage, depending on the income of the two spouses. These penalties and bonuses arise from the progressive taxstructure and the decision to impose taxes on a household basis.
For much of the middle class, marriage penalties are low. For couples without children, the maximum marriage penalty at 2001 income levels for the 60% oftaxable returns subject to the 15% marginal rate in 1997 is $225; most couples that itemize have no penalty at all. The second-earner deduction in theadministration proposal virtually eliminates the marriage penalty for these couples. Even in the 28% rate, whichcovers another 26% of taxable returns, the secondearner deduction along with the flatter rates results in no or negligible penalties. Overall, these taxpayers accountfor the middle 75% of joint returns. Taxpayerswith children could have small remaining penalties, depending on how penalties are defined. Most of those in the15% bracket who might have still havepenalties that are significant relative to income are removed from the tax roles entirely through the additional childcredits.
Lower income couples may incur penalties through the Earned Income Credit (EIC) under either proposal, although it is difficult to address EIC marriage penaltiesand bonuses. The 12% of taxpayers in higher brackets may have remaining penalties. A large fraction of thesereturns do not have large penalties because theirmarginal tax rate is the flat capital gains tax rate. Any penalties are substantially reduced or eliminated, however,due to the lower rate structure in theAdministration proposal.
The important difference between H.R. 6 and the Administration proposal is that H.R. 6 expandsmarriage bonuses in most cases whilethe Administration proposal generally reduces them due to flatter tax rates. H.R. 6 combined with rate cutswould increase bonuses in comparison tothe Administration proposal and, in many cases, in comparison to current law.
Measurement of the marriage penalty for couples depends on the allocation of children for tax purposes. When married couples are compared with cohabitatingsingles, where issues of incentives and fairness suggest attention be focused, cohabitating singles are less likely tohave children and when they do, have lowincomes unlikely to be subject to regular income tax. Thus, the issues of measuring the marriage penalty forfamilies may be relatively unimportant. This reportwill be updated to reflect legislative developments.
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