Gay Marriage Rights May Raise Tax Rates

The United States Supreme Court began hearing oral arguments on Wednesday challenging the federal law defining marriage as between a man and woman. If the 1996 Defense of Marriage Act, also known as DOMA, is struck down new found rights for gay couples could be a double-edged sword. This is because gay couples would then be subject to the same tax problems facing heterosexual couples often referred to as the marriage penalty.

The case challenging the constitutionality of DOMA was brought by Edith Windsor who was married to Thea Spyer. When Spyer died in 2009, DOMA prevented Windsor from benefiting from a major tax break provided for married couples. The break is when assets are passed from one spouse to another they are exempt from federal estate tax.

If DOMA is struck down it would open up 1,100 different federal rights granted to married couples such as Social Security survivors benefits, federal family and medical leave benefits and health insurance tax breaks among many others. On the other side however is couples with incomes over $1 million have the possibility of paying $25,000 to $30,000 more in federal and state taxes if they file jointly. This is referred to as the marriage penalty and if DOMA found unconstitutional down then gay married couples would be susceptible to the same tax burden.

Politicians may be more in favor of gay marriage now than they were in the past due to changing public sentiment as well as possible increases in revenue. The nonpartisan Congressional Budget Office in 2004 estimated that recognition of gay marriage could add up to $1 billion a year over 10 years as a result.