Money Talks

08.29.13

Why the IRS's Gay-Marriage Move Is a Big Deal

The IRS says it will recognize all same-sex marriages—regardless of where the couples live. Daniel Gross on why tax law is often the true heart of civil rights.

Benefits. Vision care. Discount cards. Joint tax returns. This is hardly the stirring language of great leaps forward in civil rights and human dignity. And a day after the 50th anniversary of Martin Luther King Jr.’s “I Have a Dream” speech, such talk seems especially mundane. Form 1040-ES is not exactly the stuff of soaring rhetoric.

And yet it is incredibly important. We’ve noted that the case that led to the Supreme Court overturning the Defense of Marriage Act was, at root, a tax case. When Thea Spyer died in 2009, her partner, Edith Windsor, was angered that she was liable for federal estate taxes on assets left to her by Spyer. Because the tax code wouldn’t recognize her as a spouse, Windsor had to pay more than $363,000 in federal estate taxes. And so she went to court—and won. Earlier this week, Walmart quietly, belatedly joined the growing number of large corporations that offer benefits to employees’ domestic partners.

Of course, there’s a long way to go. Gay marriage is legal only in 13 states. The Republican-controlled House of Representatives is profoundly uninterested in passing legislation that would expand the rights of (and obligations to) gay Americans. But the striking down of DOMA has empowered the federal government to act on its own where it can. And with a type of urgency rarely seen in the Obama administration. Earlier this month, the Pentagon announced that starting next week, same-sex spouses will be eligible for the same type of benefits that opposite-sex spouses enjoy (housing, health care, etc.). Earlier this week, the Department of Health and Human Services said same-sex couples can gain access to the same type of Medicare benefits that opposite-sex married couples enjoy. For example, they can now get coverage to pay for nursing-home costs in the same nursing homes where their spouses live.

In the latest such move, on Thursday, the Internal Revenue Service announced that same-sex married couples can file joint federal tax returns—regardless of where they live. Even couples who live in states like Texas or North Dakota, which don’t yet recognize gay marriage, can file joint federal returns as long as they marry in a state like California or Iowa, which do. The move “assures legally married same-sex couples that they can move freely throughout the country knowing that their federal filing status will not change,” said Treasury Secretary Jack Lew.

It may sound like a small thing, but it’s actually a big thing.

It’s common to hear people joke that with the growing legality of gay marriage, gay couples will officially be able to enjoy the same misery and travails that married heterosexuals do. Just so, gay married couples will be able to face the same frustrations with the tax code that married heterosexual couples do. Some will find that they pay higher taxes as a result of a joint filing, thanks to the marriage penalty. But more will find that they benefit from filing jointly—their combined income may be taxed at a lower rate than if they were to file separately. They’ll be able to take two exemptions instead of one. And so on.

Ultimately, though, the significance of the IRS’s move isn’t about the money that gay couples may save (or lose). It’s about what taxes signify. Taxes, after all, are the price and cost of citizenship. Tax breaks are a perk of citizenship. Being taxed to the fullest extent of the law, and enjoying tax breaks to the fullest extent of the law, are markers that the government accepts and regards you as a full citizen. And until now, the federal tax code hasn’t recognized gay couples as fully participating citizens.

This move doesn’t knock down all the barriers that gay couples face. Far from it. And it may complicate the lives and tax seasons of gay couples. Couples who live in non-recognition states will have to ask their accountants whether they can file a joint federal return and separate state returns. But it is yet another sign that America’s legal and corporate establishments are rapidly adapting to a new normal.