May 10, 2008

The death of Mildred Loving this week reminds us of the landmark decision of Loving v. Virginia, 388 U.S. 1 (1967), which struck down appalling anti-miscegenation laws. The Supreme Court could have simply held "it is simply not possible for a state law to be valid under our Constitution which makes the criminality of an act depend upon the race of the actor," as Justice Stewart did in his concurrence, id. at 13. But it went further, basing its decision on a "fundamental right to marriage," the contours of which have never been adequately defined. E.g., Joseph A. Pull, "Questioning the Fundamental Right to Marry", 90 Marquette L. Rev. 21 (2006).

Zablocki v. Redhail, 434 U.S. 374 (1978), which struck down a Wisconsin statute requiring a court order for permission to marry if one of the parties is subject to child-support obligation, limited the Loving principle, stating that "reasonable regulations that do not significantly interfere with decisions to enter into the marital relationship may legitimately be imposed." Id. at 386, citing Califano v. Joust, 434 U.S. 47 (1977) (upholding Social Security Act provision terminating benefits for disabled dependent child upon marriage). Zablocki distinguished Califano by noting that "there was no evidence that the laws significantly discouraged... any marriages"; Califano involved only a $20/month drop in benefits. 434 U.S. at 387 n. 12.

So what are we to make of the federal marriage penalty in the income tax code?

I am a fellow at a non-profit think-tank who owns a condo with a mortgage; this puts me in the 25% tax bracket. My domestic partner makes the astronomical salary of a BigLaw attorney, and is in the 33% bracket. If we were to marry, we'd be hit by the AMT, and have to pay over $7000 a year in additional taxes. (And nearly $9000 a year extra if we didn't file jointly.) That number will only grow as her salary increases (and if the Bush tax cuts are not made permanent), but even if we assume it stays stable, the cost to us after just ten years, if we are able to invest that money at 6% a year, would be $94,018, growing to $262,391 after twenty years. Unfortunately, we are both economics majors, so this substantial additional financial burden is enough to dissuade us from discussions of marriage. "The power to tax is the power to destroy," and the government's taxing power has had that effect.

In 1982, Judge Friendly reevaluated the question of the marriage penalty in Drucker v. Commissioner, 697 F.2d 46 (2d Cir. 1982). Friendly correctly noted that, as a matter of algebra, "it is simply impossible to design a progressive tax regime in which all married couples of equal aggregate income are taxed equally and in which an individual's tax liability is unaffected by changes in marital status." Id. at 50. "Whether policy considerations warrant a further narrowing of the gap between the schedules applied to married and unmarried persons is for Congress to determine in light of all the relevant legislative considerations." Id. at 51. A noble expression of judicial restraint.

But Drucker assumes the answer: a marriage penalty (or singles penalty, or lack of horizontal equity) is inevitable under a progressive tax regime. But why is a progressive tax regime an unyielding part of the equation? The problem disappears under a flat tax. See discussion in Lester Snyder, "Taxation of the New Era 'Family Unit'" (2007). If the right to marry is "fundamental," why does Congress's desire for a progressive tax regime trump it?

Neither Drucker nor its successors answer the question. And unlike Califano, the marriage penalty did deter marriages at the margins; the Druckers divorced to avoid future marriage penalties. Yet the Drucker court found the marriage penalty constitutional even if it prevented some marriages, which is inconsistent with Zablocki's stated reason for distinguishing Califano.

Since Drucker, there has been a violation of the horizontal equity principle that supposedly justifies the marriage penalty. Gays can marry in Massachusetts. Goodridge v. Mass. Department of Public Health, 440 Mass. 309, 798 NE2d 941 (2003). But gays who marry in Massachusetts are not only allowed to file as singles under the U.S. tax code, but are required to. Defense of Marriage Act, 1 U.S.C. § 7; I.R.C. § 6012. "Married couples of equal aggregate income" are no longer "taxed equally"; rather, I face a higher tax burden if I marry a heterosexual woman than if I marry a homosexual man of the same income.

Examining other rights the Supreme Court has called fundamental, it's hard to imagine that a $6000 tax on abortions would not be held to "significantly interfere" with what the Supreme Court calls the fundamental constitutional right to an abortion; after all, in Planned Parenthood v. Casey, 505 U.S. 833 (1992), spousal notification was held to be an unconstitutional "substantial obstacle." So either (a) the constitutional right to an abortion is more fundamental than the constitutional right to marry; (b) the marriage penalty is an unconstitutional burden on the fundamental right to marry and Drucker is wrong; or (c) there is something incoherent in current Supreme Court jurisprudence.