June 26, 2013
In 2004, the Congressional Budget Office took a look at the potential budgetary impact of the federal government recognizing same-sex marriages. With the Supreme Court's decision Wednesday to overturn the Defense of Marriage Act, that potential recognition became a reality. And what they found looks pretty promising: CBO estimated that in 2004, if same-sex marriage were legal in every state and recognized by the federal government, it would improve the federal budget outlook by "less than $1 billion a year" until 2014. It's not a huge budgetary impact, but it certainly doesn't hurt.
Why would legalizing same-sex marriage have a budgetary impact at all? As CBO writes, in 2004 there were 1,138 statutory provisions "in which martial status is a factor in determining or receiving 'benefits, rights, and privileges.' " CBO estimated that, if given the opportunity, 0.6 percent of all adults in the U.S. would enter into same-sex marriages. Based on the U.S. population in 2012, that translates to 1,883,400 people, if same-sex marriage were legal in every state.
CBO calculated that if 0.6 percent of the 2004 population entered same-sex marriages, it would increase federal tax revenues by "less than $400 million a year" from 2005 to 2010, and by $500 million to $700 million from 2011 to 2014. This would've been less than 0.1 percent of total federal revenues. As Josh Barro wrote for Bloomberg earlier this year, that number now would be closer to $400 million a year, as the Bush tax cuts were mostly extended, keeping tax revenues low.
Another component is what same-sex marriage would mean for estate-tax revenues. Right now, there is an unlimited spousal exemption under the estate-tax law, which means a spouse—defined under DOMA as "a person of the opposite sex who is a husband or a wife"—can leave any amount of assets to his or her spouse without worrying about taxes. With DOMA gone, that unlimited exemption is now open to same-sex couples as well. And even though the sum of over $363,000 in estate-tax fines that Edie Windsor went to the Supreme Court over may sound like a lot, CBO found that legalizing and recognizing same-sex marriages would have little effect on estate-tax liabilities.
The impact of same-sex marriage recognition on entitlement spending is also not what you might think. CBO found that recognition would increase federal spending on Social Security but reduce spending for Medicaid and Medicare. Why would this happen? First, recognition would boost Social Security outlays because of how marital status determines benefits in the program. As CBO writes, generally "married people fare better under Social Security than single people do." With DOMA gone, same-sex married couples are now eligible for these benefits, and there will be a slight increase in outlays because of it.
Federally recognized same-sex marriage will reduce government spending in means-tested Medicaid (as well as Supplemental Security Income) because a beneficiary's spouse's income and assets will now count as the beneficiary's, reducing benefit eligibility. The spending decrease in Medicaid is negligible, at an estimated 0.1 percent in 2014 (as estimated in 2004) if same-sex marriage were recognized in every state. Medicare spending would decrease in the prescription-drug benefit's low-income subsidy program for similar reasons.
On the whole, this doesn't come to much. But in a political environment hyper-focused on debt and deficits, the budgetary impact of same-sex marriage may help cool the sting some Republicans are feeling in the wake of the Supreme Court's decision.
June 26, 2013