One topic that often comes up in tax reform debate is what to do about the marriage penalty. As it turns out, fixing it is not as easy as it appears. A marriage penalty occurs when the tax liability of a married couple filing jointly is greater than the sum of the filers' liabilities if they were single.
Some people receive a marriage bonus, which receives much less attention.
The size of a penalty or bonus is determined by the couple's income, the way the income is split between the two, the number of dependents, and the amount of itemized and standard deductions. First, the standard deduction for joint filers is not twice that of a single filer, but less than twice. This means two unmarried taxpayers together have a standard deduction larger than the one they would have as a couple. Second, as a couple, Paul and Lisa have a larger percentage of their taxable income taxed at a higher rate. Since the joint filer tax brackets are not twice as wide as the brackets for singles, part of a couple's income may be pushed into a bracket that is higher than the bracket either person would fall into singly.