I was doing a little research on marriage tax penalties and benefits after the 2018 tax changes and came across this article:
https://taxfoundation.org/tax-cuts-and-jobs-act-marriage-penalty-marriage-bonus/ It includes one scenario where a married couple pays significantly lower Payroll taxes (social security and Medicare withholding) than if the same couple was unmarried. The article gives no explanation for the difference and it is driving me bananas.
My understanding has always been that the standard 6.2% up to a cap for social security and unlimited 1.45% for medicare is not affected by filing status (the .9% Medicare Surtax can hit a married couple earlier - but that is a seperate line item in the article).
It is Table 2 of the article, roughly reproduced below
Table 2. High-Income Taxpayers Can Face Large Marriage Penalties
Tax Bill of Married and Unmarried Couple with No Children
Person 1 Person 2 Unmarried Couple Married Couple
Income $500,000.00 $500,000.00 $1,000,000.00 $1,000,000.00
Taxable Income $488,000.00 $488,000.00 $976,000.00 $976,000.00
Income Tax $146,489.50 $146,489.50 $292,979.00 $300,499.00
Payroll Tax $15,229.40 $15,229.40
$30,458.80 $22,479.40Medicare Surtax $2,700.00 $2,700.00 $5,400.00 $6,750.00
Total Tax $164,418.90 $164,418.90 $328,837.80 $329,728.40
Penalty $890.60
The 30,458.80 seems correct for 2 500K W2 incomes. I do not understand how the married couple's payroll taxes drop to $22,479.40.
Thanks.