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Death, Taxes, and Gay Couples

This Huffington Post entry by Michael Steinberger makes a point that’s hard to argue with from a formal fairness perspective. Steinberger and co-author Naomi Goldberg note that current efforts to fix the estate tax — now slated for a one-year repeal, followed by rebirth at a higher rate — don’t do anything to equalize same- and opposite-sex married couples. While a surviving spouse in an opposite-sex marriage enjoys an unlimited exemption from the estate tax, a similarly situated same-sex survivor must pay a 45% tax on any income over $3.5 million — the same rate that applies to unmarried people. Citing data from the Williams Institute, the authors estimate that this inequality will have cost same-sex couples an extra $3.5 billion over the decade ending in 2011.

Blame DOMA. Even same-sex couples legally married in their home states don’t count as “married” under federal law, tax or otherwise. Effectively, they’re single.

But the authors’ view is myopically focused on the inequality between married couples, and misses the larger issue: Is an unlimited spousal exclusion justified in the first place? Remember, up to $3.5 million is exempt from the tax.  So we’re talking about protecting even more money for the benefit of  survivors who, I’m going to guess, often have many other sources of income besides their inheritance from a spouse. Is this good policy? Is that much money needed? Should there be no limit on the exemption?

And why should it be tied to marriage at all? I can think of plenty of other situations where a testator and a beneficiary are in a financially and emotionally intertwined relationship, where an exemption would protect the survivor just as surely as in the case of married couples. Life-long friends, elderly siblings living together, and an adult “child” caring for a parent (where the offspring dies first) are just a few of the cases illustrating that the (straight) “marriage takes all” rule fences out many people who might need help.

Once again, marriage is being used as a way to achieve a social good. And once again, it’s a poor proxy for the many kinds of situations that affect actual people.

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