Today the United States Supreme Court ruled 5/4 that DOMA is unconstitutional. In the case, Windsor v. United States, a majority of the Court clearly struck down DOMA on its face and not just as applied to Edie Windsor. She will get her estate tax refund for sure. But questions continue to mount for other married couples across the country.
One of the most piercing questions is: who will count as married for federal purposes? And, as it turns out, the answer to that question might vary from agency to agency. The Social Security Administration, for example, has some pretty specific statutory rules regarding that question. If you are married and living in a state that recognizes your marriage when you apply for social security benefits, you are entitled to receive spousal benefits. Over time, the INS has applied a rule that determines the validity of the marriage by looking to the state of celebration. If the marriage was valid in the state of celebration, then it is valid in the eyes of the INS. The Court of Appeals for the Ninth Circuit announced that rule in a gay rights case from the 1980s in which an American citizen and his foreign-born boyfriend had managed to obtain a marriage license from a County Clerk in Boulder Colorado. But because Colorado did not recognize the marriage, the court ruled that the marriage was not valid. Only Colorado law was relevant under the place of celebration rule.
What should be the rule for federal tax law? That’s a good question. I have long wondered about the special tax rules that apply to married couples. The joint return, with its penalty versus bonus rates, and its joint and several liability rules, does not make a lot of sense to me. Yes, many married couples operate as a single economic unit and so maybe we need to have some anti-abuse rules that prevent such couples from manufacturing losses within the economic unit. But not all spouses operate as a single economic unit. Some non-spousal couples do. And while I understand the argument for taxing married couples at higher rates based on their combined income — because after all two can live more cheaply than one – it is also true that taxpayers have very free choices these days about whether they live alone or together, as well as whether they get married or not. While I think marriage could be relevant to tax policy, I am not convinced that it is the bright line we have made it in our current tax policy. Perhaps the outcome in the Windsor opinion will encourage us to rethink the role of marriage in measuring income tax liability.