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Liberal, conservative lawmakers team up against Ohio marriage penalty

One of the most conservative members of the Ohio General Assembly and one of its most liberal have found a reason to join forces — on income tax reform, no less.

Reps. David Leland, D-Columbus, and John Becker, R-Cincinnati, have introduced a bill aimed at doing away with Ohio’s so-called “marriage penalty,” where many married couples filing joint tax returns pay higher state income taxes than they would if they filed separately.

Instead of current law, which requires married couples to file state taxes in the same way they file federal taxes, the bill would allow a couple to choose whether it wants to file jointly or separately, depending on which produces a smaller tax burden.

This is not a new issue — Leland said he introduced the same bill as a freshman legislator in 1983. Becker also introduced a different marriage penalty bill in 2013.

“Ohioans shouldn’t be forced to pay higher taxes just because they get married,” Leland said, adding that House Bill 333 would allow more than 2.5 million Ohioans to seek tax relief.

Leland and Becker said a married couple in Ohio with each person working full time for minimum wage paid a marriage penalty of $159 in 2016. Their bill already has 25 House co-sponsors.

In August 2016, Jessica Salerno of the Ohio Society of CPAs wrote: “Like an ugly junk car, Ohio’s marriage tax penalty has been around so long some people don’t even see it anymore. Tax practitioners don’t have that luxury, and say it’s past time to clean it up.”

A marriage penalty occurs from a combination of a progressive income tax system, where higher income is taxed at higher rates, and the taxing of married couples as a single entity. So when two people who each earn $50,000 file separately in Ohio, the tax rate paid by each person will be less than if they file jointly as a couple earning $100,000.

Most couples benefit from filing a joint federal tax return, so they also must file a joint return in Ohio.

The marriage penalty can impact couples differently, depending on circumstances. For example, a couple where one person earns the vast majority of the income often pays less in taxes by filing jointly than separately.

Ohio married couples may qualify for a joint filing tax credit up to $650 — an amount not adjusted since 1989, according to the Society of CPAs — and it usually does not cover the additional tax owed from a joint filing.

Noting that all neighboring states either do not require married couples to file the same as their federal status, or they have a tax rate that mitigates the marriage penalty, the Society recommended in 2016 to a legislative tax study commission that lawmakers make changes. It proposed allowing a different filing status in Ohio, or creating a new tax table for joint returns.

The bill likely would mean a significant cost in state revenue, which has not yet been estimated. The timing could be an issue, considering lawmakers one month ago finished a tight state budget that had to be adjusted by about $1 billion because of lagging revenue.

By Jim Siegel  | The Columbus Dispatch
Posted Aug 31, 2017

Original article at:  The Columbus Dispatch

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