When Illinois Governor J.B. Pritzker announced a proposal for his new tax plan in Illinois, he sparked debate throughout the state. Some praised what Pritzker called the fair tax law, saying it would only tax the rich and provide more money for low to middle wage earners. However, others have pointed to a major flaw in the proposal, and those opposed to it say it is going to hurt one more group: married couples.
The Marriage Penalty Under Fair Tax Law
Traditionally, when a couple jointly files their state or federal taxes, they file in separate tax brackets from those that file individually, allowing them to take advantage of tax savings. However, whenever two earners of the same household owe more taxes by filing jointly instead of separately, it is considered a marriage penalty. The new tax law proposed by Governor Pritzker does not provide different brackets that allow couples to reap more savings. Instead, couples are likely to owe higher taxes.
Under the proposed new tax law, when filing separately, each of the spouses’ first $10,000 earned is taxed at 4.75 percent. The next $90,000 earned is taxed at a rate of 4.9 percent. However, when a couple is married and filing jointly, the very first dollar made from the second income is taxed at an even higher rate of 4.95 percent....