With Tax Day upon us, Americans across the country are signing checks made out to the IRS. For the married lesbian and gay couples in Massachusetts, Connecticut, and California (and soon for those in Iowa and Vermont), that check might bring a little sharper pain than they expected. They will learn that the federal government does not recognize them as married, no matter where they live. As a result, they will pay more in taxes and receive fewer benefits than do married different-sex couples.
Let's start with tax preparation. Differences in state and federal filing rules mean that married same-sex couples must calculate two sets of state tax returns. They can file their real state returns as a married couple. But since federal law prohibits them from filing their federal tax return as married, the forms require tax calculations from state returns completed as if they were single. That's more time spent on those returns and, for those using an accountant, more expense.
Another tax hit comes through employer-based health insurance benefits. Unlike coverage for different-sex spouses, benefits for same-sex partners, even legally married ones, are taxed as income to the employee. Let's consider Tricia and Megan, married last September in Connecticut. Tricia covers Megan on her employer's health plan. Tricia's sister works for the same company and covers her husband on the same plan. Because the federal government taxes the cost of Megan's coverage, the same health insurance plan costs Tricia $1,000 in additional taxes that her sister does not pay. A study at UCLA's Williams Institute found that this unequal treatment costs American families and their employers $235 million in additional income and payroll taxes.
Benjamin Franklin spoke of the certainty of both death and taxes. For same-sex couples, they can be certain of unwanted taxes that accompany death. Let's compare what would happen to Tricia and her sister if their spouses were to pass away. If Tricia's sister loses her husband, she inherits all of his assets and doesn't have to pay any taxes. Federal law allows married different-sex couples to transfer an unlimited amount of marital assets to the surviving spouse without incurring any estate tax. But if Megan dies and leaves Tricia with a big enough nest egg, Tricia is forced to pay a whopping 45% estate tax.
Even without the nest egg, Tricia will likely still fare worse than her grieving sister. When one spouse dies, the surviving spouse gets the higher of the pair's monthly Social Security benefit. Because the federal government does not recognize same-sex spouses, they do not receive this survivor benefit. Same-sex surviving spouses must rely on their own Social Security payments. Typical surviving same-sex spouses lose $5,700 per year that Social Security would have otherwise paid them if they were treated like their different-sex counterparts.
The federal government spends at least some of these extra lesbian and gay tax dollars conducting surveys like the US Census to understand the demographic characteristics of the US population. While the Census Bureau justifiably prides itself on the accuracy of its data, they aren't very accurate when it comes to counting married same-sex couples. The Bureau changes the responses of same-sex spouses and reports them as "unmarried partners". In Census 2010, legally married same-sex couples will have their marriages rendered invisible. Talk about taxation without representation.
As they file those last-minute returns, the 750,000 lesbian and gay couples in this country, including the more than 30,000 legally married couples, are reminded that equality still has a way to go. They pay more and get less for their tax dollars. Candidate Obama promised equality for same-sex couples under federal law. We encourage President Obama to fulfill that promise before 2010 tax returns come due.
Naomi G. Goldberg is the Peter J. Cooper Public Policy Fellow at the Williams Institute, UCLA School of Law.
Gary J. Gates is the Williams Distinguished Scholar at the Williams Institute, UCLA School of Law and author of The Gay and Lesbian Atlas.