Same-Sex Civil Marriage: The End of the Marital Estate and Gift Tax Exemption?

Most on the “religious right” aren’t paying attention to rulings like this, but like Charles Rubin they should be:

The U.S. District Court for the Southern District of New York has ruled that same-sex couples can take advantage of the estate tax marital deduction provisions of the Internal Revenue Code. This ruling has far-reaching federal tax implications beyond federal estate taxes.

For all the “romantic” and “affirmation” reasons why so much of the LGBT community wants same-sex civil marriage (the latter is ably dealt with by Brendan O’Neill) there lie other more practical reasons.  I’ve mentioned some of them from time to time, but those in the tax code are a lot higher on the list than gay activists are wont to admit, such as the following:

These include (a) the federal gift tax marital deduction, (b) joint tax return filing rates and permissions, (c) favorable “stretch” and rollover provisions for IRA’s and other qualified retirement plan distributions to a surviving spouse, and (d) portability of unified credit amounts between spouses.

Exemption from estate and gift taxes between spouses probably tops the list.  The best known beneficiary of this is John Kerry, who became quite wealthy when he married Teresa Heinz Kerry, who in turn became wealthy tax-free when she became the widow of John Heinz.

Given that the LGBT community is, in general, economically privileged, and thus in a place to take advantage of this benefit, it’s little wonder that same-sex civil marriage has become the battle cry that it has.

With the romantic argument heading to the bottom, we need to look at tax benefits for civilly married people in a more practical light.

To start with, most of the provisions of the tax code which favour married people do so at the upper end of the income spectrum.  That not only explains the attraction to the LGBT community, it also is a partial explanation for why civil marriage has held up better in the upper income portions of our society.  (That trend generally extends to the array of government benefits outside of the Internal Revenue Code).

The problem with tax benefits is they are a far cry from the “rights” that LGBT activists demand as a part of civil marriage.  They are, in reality, privileges that our government extends and is perfectly capable of taking away.  The tax code is especially capricious in this regard, as anyone who has dealt with it in-depth knows.

In the wake of the judicial imposition of same-sex civil marriage in this country, this could go in one of two ways.

The first is that estate and gift taxes could be eliminated from the tax code altogether, which would be another “right” eliminated for civil marriage, and thus another incentive for people to enter into it at all.

The second is that the estate and gift tax exemption could be restricted or eliminated altogether.  Although people today tend to regard this as part of the landscape, it’s only been since early Reagan times when this has been the case.  Before that, for example, gift tax issues complicated divorces.  If the government can do something once, it can do it again…

The impetus to drop the exemption will come from two sources.  The first is our government’s need for revenue to pay its snowballing debt.  The second is “marriages of convenience” between people of the same-sex who do not necessarily have a sexual relationship.  We see this some among heterosexuals, but opening it up to people of the same-sex to avoid estate and gift taxes (and the other “benefits” of civil marriage) will be too good for many to pass up.  This would force the IRS to rig new regulations to decide whether a gay marriage is really gay, which would be a boon for tax lawyers and make good Court TV, but wouldn’t be much of a commendation for civil marriage in general and same-sex civil marriage in particular.

There are those who will tell you that same-sex civil marriage is simply a road to the abolition of civil marriage.  If that’s true, it’s a testament to the basic stupidity of our political process.  In the meanwhile we can sit back and watch as same-sex couples get into the same family law morass that heterosexual couples have experienced in this country for many years.

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