Gay marriage ruling could have small net deficit impact

{mosads}For the purpose of evaluating the DOMA decision, however, the CBO report is flawed. 

The 2004 report assumes all 50 states and the federal government allowed same-sex marriage.

The Supreme Court ruling is less sweeping because it allows states to decide whether to recognize same-sex marriage. Once a state recognizes gay marriage, the federal government can no longer deny benefits. But it does not require other states to recognize gay marriage, and it is unclear how it would affect gay couples who marry in one state and then move to a state where their marriage is not recognized.

On the other hand, the budget office also assumed that only 0.6 percent of U.S. adults would enter into gay marriages, an estimate that could be low in light of the increased enthusiasm for gay marriage in the last decade. 

In any case, with the national debt at nearly $17 trillion currently, the $10 billion impact is “virtually a rounding error,” Bipartisan Policy Center budget expert Steve Bell said. 

The Supreme Court case, United States v. Windsor, was technically about whether the original plaintiff Edith Windsor had been unfairly been forced to pay too much in estate taxes. 

The effect on estate taxes revenue overall from the decision would be smaller than the effect on individual income tax revenue, the CBO report indicates.

Married couples with higher incomes generally suffer a marriage penalty. Instead of each paying a lower marginal tax rate, when their income is combined they pay a higher top marginal rate. 

Under the old Bush-era tax cuts, the penalty was reduced, but the CBO said allowing gay marriage would increase tax revenue by up to $400 million per year.

The 2012 fiscal cliff law allowed some income taxes to rise, specifically for couples making more than $450,000. It would stand to reason that some additional revenue for the very wealthiest gay couples would now go to the federal government.

On the entitlement side, Social Security would be paying out $350 million per year more by 2014 under the original CBO study. This is because widows and widowers can receive 100 percent of a spouse’s retirement benefits, and couples with one earner can receive a 50 percent bonus benefit from Social Security. CBO estimated that most gay couples would be dual earners, so this last bonus would be less relevant to them.  

But couples would tend to lose eligibility for means-tested federal programs like Medicaid and Supplemental Security Income. Food stamps are based on household size so they would not be affected by marriage rates. 

ObamaCare spending could also go down as couples qualify for spousal employer-based health benefits. 

“Since 2004, we’ve reduced marriage penalties in the tax code a little on one side and federal ACA subsides now should go down a little as some partners jump onto spouses plans and/or are less likely to be eligible for subsides,” explained BPC’s Loren Adler.