Tax Day 2008: The Cost of Being Gay

By Lara Schwartz

Originally published on Advocate.com April 09 2008 11:00 PM ET

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.

 


Federal
employment is an attractive option for many workers thanks
to the diversity of opportunities and the competitive
benefits programs. The federal government does
not provide equal benefits for same-sex couples,
however. A GLBT person who is a top employee is
compensated unequally -- her family is denied health
insurance, pension benefits, and even evacuation
services for foreign-service officers’
families. This not only denies GLBT people access to good
jobs -- it denies our government access to some of the
top talent. 
 


If that
weren’t bad enough, how about having to choose
between your job and caring for your family? The
Family and Medical Leave Act provides up to twelve
weeks of unpaid leave to care for a spouse or child, but
same-sex couples are excluded. 
 


The law is
designed to create incentives to do socially valuable
actions such as investing, buying a home, offering or
making use of health insurance benefits, and providing
support and security to one’s family. For
same-sex couples, these incentives are turned on their head.
It’s bad policy. And it’s behind
the times. Over 50% of Fortune 500 companies offer
domestic partner benefits. The law needs to
catch up. 
 


That’s why
HRC is promoting the Family Matters legislative agenda: the
Domestic Partner Benefits and Obligations Act, which would
provide equal benefits to same-sex partners of federal
civilian employees; the Tax Equity for Health Plan
Beneficiaries Act, which would end the tax inequities
that currently apply to employer-provided health insurance
for domestic partners; the Family and Medical Leave
Inclusion Act, and legislation currently in
development on other family protections.

 
HRC also continues to work with
the nation’s leading employers to expand
employee benefits programs, family and medical leave,
and equal retirement savings options. Over fifty major
employers from every region of the country support
eliminating the taxation of these benefits, and their
numbers are growing. 
 


Tax season is a
great time to get your financial house in order, and
minimize the cost of being gay.
Information is
available on the HRC website on what families can do
to secure the maximum protections while the law
catches up -- including medical and financial
directives, information about partnership agreements, and
more. 


This tax day,
consider the unreasonable cost that our tax code and other
laws impose upon GLBT people and their children. As long as
same-sex couples are given unequal compensation and
unequal protections for equal work and equal
commitment, we cannot truly call ourselves a land of
opportunity.