Monday, February 25, 2013

The Gay Penalty Tax

Beyond the discrimination inherit in the ban on same-sex marriage, the refusal of the U.S. government to legally recognize same-sex marriages imposes steep financial penalties on same-sex couples.  And well-known financial advisor Suze Orman has now labeled it the "gay penalty tax".

If the federal government were to recognize same-sex marriage, then the death of one of the partners would result in the seamless tax-free transfer of assets to the survivor. That's a basic right that every heterosexual married couple has.

But because there is no federal recognition of same-sex marriage, there would be a federal estate tax bill that a surviving partner would have to pay upon death of the other. For a heterosexual married couple, there would be no estate tax regardless of the size of the estate or who died first.

Every gay couple is also discriminated against when it comes to Social Security benefits.  For married heterosexual couples, the lower earner can opt to collect a monthly benefit check that is equal to 50% of his or her spouse's benefit. More importantly, when the high earner dies, the surviving spouse is allowed to collect 100% of the deceased's higher benefit.

Because same-sex marriages aren't recognized on the federal level, gay and lesbian couples are not eligible for these same Social Security spousal benefits.

Health insurance is another area of  financial discrimination against gay couples. Even as more and more  employers are extending health insurance benefits to same-sex partners, the IRS requires that the value of this coverage be treated as taxable income  because same-sex couples are not considered legally married under the eyes of the federal government.

A 2007 study estimated that this gay health insurance penalty costs same-sex couples an aggregate of $178 million ($1,069 per household), while employers paid an additional $57 million in payroll tax on that taxable income. No heterosexual married couple or their employers pay that penalty.

Whether or not same-sex marriage is against your religious values, how can it be fair to financially penalize same-sex couples in this way?

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