Same-Sex Marriage Injustice: Straight Couples Pay $1,069 Less in Taxes

Employers should change their LGBTQ priorities to include the absorption of an added tax on the transfer of health benefits among domestic partners while advocating for the repeal of the exclusionary Defense of Marriage Act (DOMA).

The 1996 DOMA defined marriage as “only a legal union between one man and one woman as husband and wife, [where] the word ‘spouse’ refers only to a person of the opposite sex who is a husband or wife.” This legislation affects the daily lives of the estimated 901,997 U.S. same-sex couples. However, LGBTQ activists did not originally recognize another effect of DOMA – the law’s impact on Internal Revenue Service (IRS) policy whereby health care benefits transferred by employees to registered domestic partners – within those organizations that recognize domestic partnerships – are taxed as income. This policy results in same-sex couples paying on average at least $1,069 more than identical heterosexual, married couples in taxes.

In attempting to ameliorate inequitable tax practices affecting same-sex couples, progressive organizations are “grossing-up” the wages of employees in same-sex partnerships. This practice involves increasing employees’ pre-tax salaries in order to account for the tax on shared health benefits and the added income tax of such an adjustment. In this way, they equalize the tax burdens paid by employees regardless of sexual orientation, gender identity, and gender expression. Tech start-ups and investment houses, in particular, including Google, Facebook, Apple, Barclay’s, and Goldman Sachs all “gross-up” domestic partners’ wages. Recently, Bowdoin College also instituted a similar policy.

Action by these employers motivated the Tax Parity for Health Plan Beneficiaries Act of 2011, introduced by Senator Charles Schumer along with eighteen cosponsors on June 9,  2011 and since referred to the Committee on Finance.

Analysis

Existing policy on domestic partner benefits places an unfair tax burden on same-sex couples. While DOMA remains a significant roadblock on the way toward a culture of inclusion with respect to LGBTQ Americans, by removing the tax burden currently enforced by the IRS in conjunction with federal law, we can make using health care, filing tax returns, and pursuing employment that much easier for same-sex couples. The current tax structure fails to account for the increasing number of organizations that recognize domestic partnerships, number of same-sex couples, as well as state-level successes with marriage equality. Institutionalizing a more equitable tax structure for recipients of domestic partnership benefits would clear up confusion among couples, legislators, and lawyers in states that do recognize civil unions, marriage equality, or same-sex relationships that originated in other states. Amending the existing tax structure imposed on domestic partnership beneficiaries will positively affect almost a million same-sex couples in the United States by removing everyday difficulties of taxes, health insurance, and employment options.

Next Steps 

It is essential that progressives across the United States highlight this issue in national discourse by amplifying the experiences with tax inequities among same-sex couples through storytelling. Using Senator Schumer’s bill as a template, organizations that recognize domestic partnerships can implement “grossing-up” practices and join a coalition of 80 businesses committed to “tax equity” to place political pressure on officials to legislate.8 Once this issue attracts more supporters -- particularly among employee LGBTQ affinity groups -- a critical mass will be able to force change in Congress that will eventually lead to the repeal of DOMA.

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Erik Lampmann

A student leader, policy innovator, and queer advocate, Erik works to devolop a world of inclusion, respect, and sustainable social change.

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