How US tax laws discriminate against women, gays and people of color

What and how a country chooses to tax says a lot about its values.

A core value built into the DNA of America, for example, is equality. And in practice, Americans imagine their country to be more equal than it is and strive to treat every member of society that way.

But, as I learned in researching my book “Our Selfish Tax Laws: Toward Tax Reform That Mirrors Our Better Selves,” America’s tax laws paint a different picture.

Instead of reflecting a society constantly striving to better itself, U.S. tax laws are mired in the past. They reinforce the social and economic marginalization of women, racial and ethnic minorities, the poor, members of the LGBTQ community, immigrants and people with disabilities.

Even after gay marriage was legalized in the U.S., same-sex couples still struggle with taxes. AP Photo/Jacquelyn Martin

Tax and marriage

For instance, U.S. tax law has chosen marriage as the defining characteristic of all individuals when deciding how income tax returns should be filed. That is, most Americans file their 1040s either as “single” individuals or as “married filing jointly.” But even when taxpayers in these two groups have equal incomes, they aren’t necessarily treated equally.

Among married couples, our tax laws give preferential treatment to those whose marriages comport with “tradition” – that is, with one spouse working in the labor market and the other in the home. These couples are rewarded because they pay less tax than if they earned the same amount but hadn’t married.

In contrast, those in “modern” marriages – with each spouse working outside the home – often suffer marriage penalties. These couples pay more tax than if they earned the same amount but hadn’t married.

And “single” taxpayers never receive a bonus but instead often pay more tax than a married couple with the same income.

While the Tax Cuts and Jobs Act passed in 2017 temporarily mitigates the marriage penalties for some two-earner married couples, it fails to address other aspects of the tax laws that contribute to the marriage penalty. Low-income married couples, for example, are still hit with significant marriage penalties under the Earned Income Tax Credit.

At the same time, the act increased the bonuses paid to single-earner married couples that provide financial encouragement for one spouse – traditionally, the wife – to stay at home. To take a simple example, an individual making US$100,000 with no dependents who takes the standard deduction would see a 43 percent reduction in taxes in 2018 by marrying a stay-at-home spouse but would have seen a reduction of only about 38 percent in 2017.

The penalty for not marrying increased correspondingly.

Rewarding discrimination

The tax treatment of employment discrimination awards is another example.