Study: Same-sex marriage will boost Oklahoma income tax revenue

Photo by Jose Antonio Navas.
Photo by Jose Antonio Navas.

Now that same-sex marriage is legal in Oklahoma, there’s one big question on everyone’s mind: how is it going to affect state tax revenue?

Okay, maybe that’s not on everyone’s mind, but researchers at Tulane, Vanderbilt, and Western Kentucky Universities have given it a lot of thought. Their research published earlier this year in the Journal of Policy Analysis and Management makes an extremely detailed examination of how same-sex marriage will affect state and federal taxes in Oklahoma and across the nation. They also provide a hint on how many same-sex couples in the state may take advantage of their new right to marry.

The effect of marriage on income taxes is complicated. Depending on a variety of factors, including overall income levels of the household, the income difference between partners, the number of dependents, and more, filing taxes jointly may result in a marriage boost or a penalty. The Tax Policy Center has an online tool where you can calculate what marriage bonus or penalty you might face in federal taxes. On the federal level, tax cuts passed in 2001 and 2003 effectively eliminated the marriage penalty for low-income households. For middle- and upper-income households, couples are more likely to pay a marriage penalty when they make similar incomes and more likely to receive a marriage bonus when one partner makes significantly more than the other.

[pullquote]There are an estimated 526,452 same-sex couples living together in the United States, and 4,667 in Oklahoma.”[/pullquote]To dig through all these variables, the researchers used data from the 2010 American Community Survey, a part of the U.S. Census which collects more detailed information on a random sample of individuals and households in each state. Using statistical probability, the sample can be used as a proxy for the entire population. To estimate the number of cohabiting same-sex couples in a state, they identified families where the head of household was living with an unmarried partner of the same gender. This method reveals approximately 526,452 same-sex couples living together in the United States, and 4,667 in Oklahoma.

The researchers estimate there will be a 50 percent marriage rate for these couples soon after legalization. That’s a conservative assumption based on the experience in states that have previously allowed same-sex marriage, and the authors acknowledge that it’s likely a higher percentage will marry over time. Finally, using income data and a tax simulator tool, they estimate the affect on state and federal income taxes owed.

If same-sex marriage becomes legal nationwide, they find that 23 states would see a net benefit, while 21 states would see a revenue decline. The effect ranges from a state revenue decrease of $29 million in California to a gain of $16 million for New York. On the federal level, nationwide legalization of same-sex marriage means a revenue loss of $187 million to $580 million.

Oklahoma is one of the states expected to gain revenue, though same-sex couples will save overall due to a decrease in federal taxes. The study estimates that as a group, newly married same-sex couples in Oklahoma will pay $350,000 to $2 million less in federal taxes and $100,000 to $500,000 more in state taxes. Tax effects will vary dramatically between households, but the researchers estimate the average state tax increase for Oklahoma same-sex couples will be $98.10.

The researchers went to great lengths to account for the large number of variables that would affect this result, including many factors too detailed to discuss in this blog post. Because so many variables come into play, any estimate is inherently uncertain. But we can say that the most in-depth research done on this question finds that same-sex marriage will boost Oklahoma’s income tax revenues.

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Gene Perry worked for OK Policy from 2011 to 2019. He is a native Oklahoman and a citizen of the Cherokee Nation. He graduated from the University of Oklahoma with a B.A. in history and an M.A. in journalism.

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