Tax Day 2008: The Cost of Being Gay

State and federal laws impose real dollar costs on real people. Call it “The Cost of Being Gay.” Many of the most significant examples of this cost occur in state and federal tax law. On tax day (April 15), Americans file both state and federal tax returns. For GLBT couples, tax day is a concrete reminder of the inequality that results from being denied marriage rights and from the Defense of Marriage Act (DOMA), which denies federal recognition of same-sex relationships for over one thousand federal protections. 


The Cost of Being Gay can have a serious impact. Take social security: on tax day, all American workers file tax returns that include, among other things, a statement of the total amount of social security payroll taxes they paid. GLBT Americans pay the same payroll taxes as everyone else, but are excluded from spousal benefits and survivors’ benefits. In fact, even children raised by same-sex couples are treated unfairly. A surviving child of a deceased GLBT worker can lose out on benefits worth tens of thousands of dollars over their childhood -- money that could pay for food, clothing, and education.
 


At the state level, homes and savings are subject to unfair taxation too. For example, when someone puts his or her same-sex partner on the title to a home, it often constitutes a transfer of 50% of the value of the home -- as if the two were strangers -- and is taxed accordingly. Different-sex married couples do not pay this tax. Inheritance taxes apply when a taxpayer dies and leaves assets to another person. Different-sex spouses receive a complete exemption from such inheritance taxes, but same-sex partners do not (except in states with marriage, civil unions, domestic partnership, or special tax exemptions for partners). Because thresholds for state inheritance taxes are much lower than the federal threshold, inheriting the couple’s common home (or even the half of it that belonged to the deceased partner) can trigger inheritance tax. 


Most workers look to their employers for health insurance, but this opportunity costs more for same-sex couples than other families. That’s because although employer-provided health benefits for different-sex couples are excluded from an employee’s gross income, domestic partner benefits are taxed. This can result in a tax hit of over $1700 annually. 
 


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