Report: Utah tax and benefit rules produce marriage "penalties," but state can change thresholds

Economists from the Kempsey Gardner Policy Institute told the Revenue and Taxation Interim Committee on June 18 that several Utah tax and benefit rules create so‑called "marriage penalties," meaning benefit amounts or income thresholds for married filers do not scale proportionally from single filers.

The findings matter because marriage penalties can affect eligibility for state-administered benefits and state income‑tax credits. "A marriage penalty occurs... in a tax provision or a benefit program where the benefit amount or the income threshold for married filers does not exactly double the benefit amount or the income threshold for single filers," said Maddie Orritt, senior public finance economist at the Kempsey Gardner Policy Institute.

The institute identified three ways marriage penalties show up in state law: direct single-to‑married penalties; head‑of‑household to married penalties; and household‑composition effects when eligibility is tied to household income. Orritt used Utah's earned income tax credit (EITC) as an example: the state EITC is 20% of the federal EITC and, for families with children, the credit plateaus and phases out at income thresholds that do not scale proportionally across household types. Orritt noted that for a head‑of‑household filer with one child the EITC phases out at about $23,000, while the married‑filing‑joint threshold is about $30,000, creating a potential penalty for marriage.

The economists emphasized nuance: "This is very nuanced... even in cases where we are gonna get into the details on certain marriage penalties, there may be cases where a certain filer may not experience a penalty even though most filers would," Orritt said. They also noted that marriage bonuses exist in some parts of the tax code and can offset penalties for some households.

Where the state can act: the presenters said most state tax provisions that produce marriage penalties are written in state statute and therefore could be changed by legislative action (for example, adjusting income phase‑out thresholds or credit formulas). By contrast, many public‑benefit programs administered with federal rules—such as programs tied to the federal poverty guidelines—are not under state control and generate household‑composition effects the state cannot unilaterally fix.

Committee members raised real‑world examples of the stakes. Representative Jon Ward described a case he knows where a disabled man receives home services through Medicaid and could lose those services if he marries because his spouse's income would push household income above Medicaid eligibility. "If they marry, he will lose it... their option is to just not get married if he is gonna retain that benefit," Ward said, underscoring how marriage‑eligibility interactions can affect personal decisions about household formation.

The presenters pointed to federal context: the Tax Cuts and Jobs Act of 2017 reduced many federal marriage penalties by equalizing brackets, and those provisions were scheduled to expire in 2025; at the time of the presentation the U.S. House and Senate had competing proposals that could extend or alter federal rules. The economists also noted federal proposals such as the Family Security Act 2 (introduced in the U.S. Senate) that would eliminate the head‑of‑household filing status and expand child tax credits as a possible workaround to some marriage‑status disparities.

The institute published a full report in April and provided a QR code at the committee meeting; presenters said the report includes the statutory list of tax provisions analyzed and tables indicating where state discretion exists to alter thresholds or benefit levels. The committee did not take formal action on the report during this hearing.