In the wake of last month’s U.S. Supreme Court decision striking down the Defense of Marriage Act (DOMA), the Justice Department has been busy reviewing more than 1,000 federal laws and regulations to identify and implement necessary changes. Now that marriage is no longer defined- at the national level- as the union of a man and a woman, everything from income and estate taxes to workplace benefits will have to be revised to include same-sex couples.
While this sounds relatively simple, there are significant wrinkles that will still need to be ironed out. Take Social Security, for instance. The rules that determine who qualifies for spousal benefits specifically defer to the definition of marriage used by a couple’s state of residence. For instance, say two individuals got married in Massachusetts, which acknowledges same-sex marriage, but live in Tennessee, which does not. In this case, since their home state doesn’t recognize their union, neither partner would be eligible for spousal benefits. Moreover, Social Security’s reliance on the definition of marriage at the state level is written into the regulations, so it would literally take an act of Congress to change this.
By Aug. 1, 13 states plus Washington, D.C., will officially recognize marriage between same-sex couples. That leaves 37 states that will not (See chart below). Now the question is: Will we see same-sex couples who live in these states move to those that are more accommodating? There is no simple answer.
“I would assume that people will act in their financial self-interest, especially if they feel their state isn’t likely to change soon” says Kamy Akhavan, president of ProCon.org.
Stuart Gaffney, spokesperson for Marriage Equality USA agrees. “People who have a choice will naturally be drawn to marriage equality states.”
But this doesn’t mean we’re likely to see a mass exodus from states that don’t recognize same-sex marriage. Anyone who has changed residences- even within the same town- knows that moving is traumatic. It uproots you from everything that is comfortably familiar: family, friends, neighbors, religious and community organizations, the mechanic you trust, the vet you rely on and the doctors you trust. It might even involve one or both individuals finding new jobs. In addition, since most of the states that currently recognize same-sex marriage are located in the northern part of the U.S., moving could also involve getting used to a totally different climate. As Gaffney puts it, “Other circumstances intervene in our lives.”
While qualifying for Social Security spousal benefits(1) might be a significant economic incentive to move (especially for those near retirement age), there are also numerous economic disincentives--particularly, taxes. Income and property taxes vary state to state. For instance, a couple living in Pennsylvania, which does not recognize same-sex marriage but has a top income tax rate of 3.06%, could see their state income tax bill triple if they relocate to Vermont. In addition, Pennsylvania residents pay no state income tax on retirement income such as Social Security, pensions, IRA and 401(k) withdrawals, etc.
However, this may all be a moot point in a few years. In Gaffney’s view, “The pace of change is accelerating.” He points out that polls show increased public support for same-sex marriage, including “a majority of U.S. Senators.” In fact, Gaffney is optimistic, that “easily, 10 states in the next year” will legally embrace the concept, the two most likely being Illinois and New Jersey.
The more probable scenario is that many same-sex couples living in states that do not recognize their unions might simply decide to wait it out. According to Gaffney, many people have the attitude, “‘I want to stay where I live. I want to make this a reality in my home state.’”
The chart below illustrates the states which have adopted laws recognizing same-sex marriage as well as their sales and top income tax rates. Note that in addition to these differences, there is also considerable variation with regard to how states treat tax deductions, capital gains and property tax rates.
a. Source: Marriage Equality USA
b. This number is based upon the statewide sales tax rate, if any, plus the average sales tax rate at the city and county level.
c. Source: The Tax Foundation, http://www.taxfoundation.org
* Percentage applied to amount of federal income tax owed.
** As of August 1, 2013
1. Depending upon your marital status at the time you apply for a spousal benefit- i.e. current spouse, divorced spouse or widow/widower- the length of time you have to be married in order to qualify varies.