Measuring the Effect of the EITC on Marriage Penalties and Bonuses

In 2000, the EITC will increase marriage penalties by at least $3.1 billion (10.4 percent) and reduce marriage bonuses by $439 million (1.5 percent). Over half of EITC-related marriage penalties will be attributable to couples who currently are ineligible for the EITC because their income is above $30,000. However, estimates of marriage penalties and bonuses are very sensitive to assumptions regarding a couple’s living arrangements and custody agreements if they do not file joint returns. Recent proposals to provide marriage penalty relief through the EITC are well-targeted to lower-income taxpayers but vary in their ability to reduce marriage penalties.