Millions of LGBT Families Pay Higher Taxes Due to Outdated Federal Tax Laws

WASHINGTON, D.C., APRIL 16, 2012 — Tomorrow, taxpayers will form long lines in post offices across the country in order to meet Tax Day’s midnight deadline. However, according to a new report released today, a significant number of those taxpayers are not procrastinators, but millions of American families who face unequal and inflated tax burdens and tax filing so complicated even accountants cannot always advise them. Those families, led by parents who are lesbian, gay, bisexual or transgender (LGBT), face higher tax burdens due to outdated and discriminatory federal tax laws that result in some American families paying more just because of who they are.

The report, Unequal Taxation and Undue Burdens for LGBT Families, provides a groundbreaking and in-depth look at the income tax inequities faced by LGBT families. It also outlines recommendations for amending and repealing archaic and discriminatory tax laws that harm children who have LGBT parents. Co-authored by the Movement Advancement Project, Family Equality Council and the Center for American Progress, it is a companion study to the All Children Matter report—released in October, 2011—which detailed how antiquated laws and stigma harm children living in LGBT families in America.

Unequal Taxation and Undue Burdens for LGBT Families illustrates how many tax exemptions, credits and deductions designed to help families ease the financial burdens of raising children are unavailable to families with LGBT parents. The report also shows that, because LGBT families are denied federal recognition of their marriages and denied joint filing status due to the Defense of Marriage Act (DOMA), they face higher taxes on family health insurance benefits and additional gift and estate tax liability.

“President Obama has spoken repeatedly about the need for everyone in this country to have a fair shot - for everyone to do their fair share and play by the same set of rules. And we agree," said Family Equality Council Executive Director Jennifer Chrisler. “Unfortunately, because of DOMA and current tax laws, LGBT families are not getting a fair deal when it comes to taxes and face higher tax burdens and fewer chances for tax relief. We look forward to the day when Congress does the right thing and changes the laws and policies so that LGBT families aren’t unfairly penalized because of who they love.”

“Federal tax law has not kept up with today’s families,” said Movement Advancement Project Executive Director Ineke Mushovic. “Contrary to stereotypes, children being raised by same-sex parents are more likely to live in poverty. Our analysis shows that a low-income LGBT family of four making $34,555 could lose $6,209 versus a heterosexual family with identical financial circumstances. Denying LGBT families child-related tax relief hurts children and makes it harder for parents to provide for their families.”

The report finds that:

• LGBT taxpayers pay more just because of who they are. Whether it’s an LGBT family who pays and average of $1,069 more in taxes on family health insurance benefits or a widowed LGBT spouse with no marital deduction for estate tax liability, LGBT families pay more taxes because same-sex couples do not qualify as “spouses” under the federal definition.
• LGBT families are unfairly denied important deductions, exemptions, and credits. Many states make it hard or impossible for two mothers or two fathers to both be recognized as legal parents of their children and as a result, to claim important child?related deductions and credits, particularly when the non?recognized parent is the primary wage earner in the family. These may include the $3,700 per child dependency exemptions, up to $4,000 in education-related deductions and credits, and up to $5,751 for the Earned Income Credit which provides critical tax relief to low- and moderate-income families.
• LGBT families are unfairly denied joint filing status and accompanying tax relief. Same?sex couples cannot receive the significant tax advantages of the “Married Filing Jointly” tax status, an added and unnecessary challenge when so many families are already struggling to make ends meet.
• LGBT families must misrepresent and “carve up” their families. Married same-sex couples must file as unmarried yet certify, under penalty of perjury, that everything they’ve said is true, correct, and complete. Same-sex couples are forced to decide which parent “claims” their children for exemptions. To gain tax relief, some families must split their children between different tax returns. In some cases, LGBT parents can only claim their children as “dependent relatives” or cannot claim them at all.
• LGBT families face heightened scrutiny, extra costs, and refund delays. LGBT families must run multiple tax scenarios, create “dummy” federal returns, submit extra paperwork, and face audits and denials of legitimate tax credits.

“The federal tax code simply ignores the fact that millions of LGBT families exist in America today, “said Jeff Krehely, Vice President of LGBT Research and Communications Project for the Center for American Progress. Policymakers should take immediate steps to end existing inequalities and put LGBT families on equal footing with all others. It makes no economic or fiscal sense to base our nation’s tax policies on anti-LGBT stigma or bias.”

Unequal Taxation and Undue Burdens for LGBT Families is available online at www.children-matter.org or at https://www.lgbtmap.org/unequal-taxation-undue-burdens-for-lgbt-families.

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ABOUT THE AUTHORS

MAP's mission is to provide independent and rigorous research, insight and communications that help speed equality and opportunity for all. MAP works to ensure that all people have a fair chance to pursue health and happiness, earn a living, take care of the ones they love, be safe in their communities, and participate in civic life.

Celebrating its 30th Anniversary, Family Equality Council connects, supports, and represents the one million lesbian, gay, bisexual, and transgender parents in this country and the two million children they are raising. Learn more at www.familyequality.org.

The Center for American Progress (CAP) is a nonpartisan research and educational institute dedicated to promoting a strong, just and free America that ensures opportunity for all. The Fighting Injustice to Reach Equality Initiative (FIRE) at CAP explores the intersections of race, sexual orientation, economics, and public policy. Learn more at www.americanprogress.org.