Tax Day 2008: The Cost of Being Gay
By Lara Schwartz

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.