1. Marriage Tax or Subsidy
Problem #1 from Midterm

2. Married Filing Jointly
Brackets
Single
Married Filing Jointly
$0 - $20,000
10%
$20,000 +
20%
$0 - $40,000
10%
$40,000 +
20%

3. Taxable Income
Individual
Taxable Income A
$10,000 B
$40,000

4. Single Tax Liability Single Brackets Rate $0 - $20,000 10% $20,000 +
Income in Bracket
Tax Liability
Tax Rate A B
10%
$ 10,000
$ ,000
$ 1,000
$ 2,000
20% $
$ 4,000
Individual Total
$ 6,000
Family Total
$ 7,000
Single Brackets
Rate
$0 - $20,000
10%
$20,000 +
20%

5. Married Filing Jointly Brackets
Married Tax Liability
Couple
Tax Rate
Tax Liability
$ ,000
10%
$ ,000
$ ,000
20%
$ ,000
Total
$ ,000
Married Filing Jointly Brackets
Rate
$0 - $40,000
10%
$40,000 +
20%

6. Reason on tax subsidy Disparate incomes
More of Individual B’s income is taxed at 10% rather than in the higher bracket with the 20% rate