Should Gay Couples Pay the Same Taxes as Straights?

By :: December 17th, 2009

Interesting discussion today at a TPC forum on the tax and benefits consequences of being gay. The benefit issues are probably larger, but this is TaxVox, so let’s look at taxes.

As my TPC colleague Bob Williams noted, when it comes to federal taxes the question is not whether you are gay or straight, but whether or not you are married. Depending on the relative income of each spouse, married couples either enjoy a marriage bonus or suffer a marriage penalty. Of course, heterosexuals can choose to marry or not and live with the tax consequences. Gays and lesbians have no such option. Even though a handful of states now recognize gay marriage, for federal tax purposes their marital status is irrelevant. As a result of the 1996 Defense of Marriage Act, gays cannot be married for federal law purposes.

This creates a number of problems for these couples, some very serious, others merely annoying. For instance, Massachusetts recognizes gay marriage. But it requires all married couples to file jointly and it piggybacks its returns on the federal 1040. Trouble is, gay couples are not allowed to file a joint federal return. So they must fill out two single IRS returns, then a joint federal return that they are not allowed to file, and finally a state return based on their illegal Form 1040. More seriously, while many businesses now provide spousal benefits to gay couples, the value of the non-employee’s benefits is taxable for unmarried couples, but tax free for those who are married.

While many politicians are perfectly happy with this state of affairs, there is growing interest in treating gay couples equally with heterosexual couples under the Tax Code. So how to do it? One option would be to eliminate joint filing entirely and have everyone file as an individual. That would run into some old Supreme Court cases that draw a sharp distinction between income earned in community property states and in those states where each earner’s income is presumed to be theirs and not divided equally between the spouses.

A second option might be to redefine eligibility for joint filing (as well as for tax treatment of benefits) to those who have entered into civil unions under state law. This would avoid the community property problem and bring federal tax law more in line with what appears to be a growing legal trend. Currently, about a dozen states grant some domestic partnership rights to gays and public opinion polls suggest there is broad support for these rights. By contrast, most Americans still oppose gay marriage.

There are downsides to this solution as well. A person’s tax liability in one state would be different than the liability of someone in exactly the same economic situation who lives in another state. And eliminating joint filing would still be hugely controversial, in no small part because it would raise the tax bills of millions of couples. But it would treat taxpayers equally, and, by using the civil union definition, would avoid most of the political baggage that goes with that word “marriage.”

16Comments

  1. Anonymous  ::  8:42 pm on December 18th, 2009:

    If DOMA is repealed next year, gay marriages will be just like straight ones for tax purposes. If Proposition 8 is overturned, DOMA may go with it without legislative action – also solving the problem. Rumor has it that DOMA won't be touched until after the 2010 elections and the way the federal courts work, it will likely be the end of the 2011 spring term until the SCOTUS releases a decision – and that would be fast work.
    Of course, the tax provisions of DOMA could simply be eliminated as part of any comprehensive tax reform, although that is unlikely given the current administration's fixation on not raising middle class taxes and the PERABs desire not to make any recommendations.

  2. Anonymous  ::  5:24 am on February 2nd, 2010:

    I think every person should pay the same tax.I am against the idea of different taxes to Gay couples.

  3. Anonymous  ::  3:15 pm on March 7th, 2010:

    I'll pay my tax when I'm an equal citizen. Until then no way! I would be an idiot to fund my own discrimination, don't you think?

  4. Anonymous  ::  10:01 am on May 6th, 2010:

    For equality, gay couples should pay same tax. I hope people would not discriminate other sex because they are still humans and citizens. I guess there's nothing wrong whether they are straight or not, as long as they are good citizend in their place, then there's no problem at all.
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  5. Anonymous  ::  8:02 pm on June 7th, 2010:

    I agree that every person should pay the same tax including gay cam couples, but I don't think that should be until gay people are treated exactly the same as non gays which includes marriage, health coverage ect..

  6. Anonymous  ::  8:25 pm on July 26th, 2010:

    You hit the nail on the head.
    I am an attorney in Edwardsville Illinois. My state does not recognized same sex marriages. My clients come in to my office all of the time and tell me that they want marriage.
    Marriage is great, but it still does not help them with the problem that the federal government does not recognize the marriage because of Defense of Marriage Act (DOMA). The first fight should be DOMA and then marriage.
    There are literally thousands of laws that are eliminated for the lgbt community because of it. The largest effect is a person's estate and estate taxes that will take affect on December 31, 2010. The gay and lesbian community needs to look at an estate plan to protect themselves.
    My firm created a new website that talks about a lot of these tax law issues. Check it out at

  7. Anonymous  ::  9:36 pm on July 26th, 2010:

    It would be helpful if my link showed up http://www.samesexlegal.com

  8. Anonymous  ::  3:27 am on August 6th, 2010:

    Gay couples can get some of the same tax protections as heterosexuals. You just need to know where and how to get them. I am an attorney in Illinois where same sex couples marriage is not recognized. My law firm specializes in asset protection.
    If you use estate planning and business planning techniques the lgbt community can get some equal protections, while we wait for DOMA to be repealed. Check out my website at http://www.samesexlegal.com

  9. Anonymous  ::  12:14 pm on September 1st, 2010:

    I think yes, there are also many fake marriages going on and it will surely stop and save marriages which are legit

  10. Anonymous  ::  12:15 pm on September 1st, 2010:

    I think yes, there are also many fake marriages going on and it will surely stop and save marriages which are legit

  11. Anonymous  ::  3:38 pm on October 20th, 2010:

    I think they should be banned from all the states, what they are doing is wrong they should be taught a lesson for doing un-natural thing. financial spread betting

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  14. Tax Penalties of DOMA  ::  2:58 pm on March 26th, 2013:

    […] In 2009, the Tax Policy Center and the Williams Institute held a panel discussion called “The Higher Cost of Being Gay: Life, Death, and Taxes.” As Howard Gleckman wrote, […]

  15. The Cost of Being Gay and Married | OP-e  ::  5:36 pm on March 26th, 2013:

    […] In 2009, the Tax Policy Center and the Williams Institute held a panel discussion called “The Higher Cost of Being Gay: Life, Death, and Taxes.” As Howard Gleckman wrote, […]

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