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Wednesday, February 16, 2005

Divorce, marriage and taxes....

Reading an article in last Sunday's Observer, I was reminded of an old Alan King joke from the late 1950s or early 1960s. Let me state upfront that I am not one known among friends and family for my powers of recall, so the fact that I remember this particular joke is notable on those grounds alone. I should also mention that if I am anywhere close to accurate on the dates, I would need I heard this joke when I was around 10 to 13 years old.

The joke is really a single punch line: The 10 Commandments declares "thou shalt not commit adultery"; New York State says you must!

The context at the time was the fact that divorce laws in New York and many other states set quite high standards for breaking marriage vows. It was a time when Reno, Nevada was best known not for gambling but rather as the place celebrities and wealthy individuals could go for a "quickie" divorce (if I recall, six weeks residence in Nevada made you eligible for a divorce that was recognized as legal throughout the country because of the 'full faith and credit' clause of the US Constitution). Considering the current state of divorce laws throughout the US, as well as the number of divorces that took place during the decades after liberalization in the 60s, it's amazing to think that laws have ever been that conservative in the US.

I suspect the main reason this particular joke stands out among all those I've heard over the past 50 years is that it has served me well as an anecdote when I lecture on American federalism. Since I just spoke on that subject a few days ago, it's also probably the reason why it immediately came to mind when I read the story in question.

The gist of the article can be summarized by the phrase: You have the freedom not to marry, but British tax law says you must!

It seems that in the UK, a couple that has been happily cohabitating for 22 years, in a relationship that includes two children -- ages 19 and 15 -- and in all respects is quite stable without the assistance and support of a formal marriage arrangement, must come to an "end" -- that is, they must get married -- because of the country's inheritance tax (IHT) laws. Under the tax laws of Great Britain, if one of the partners dies, the other must pay a stiff tax on any "inheritance" over 263,000 pounds. That may seem like a lot, but for the UK middle-class that is less than the value of the average home in the London area (and probably in other parts of the UK where housing values have skyrocketed in recent years).

Now here's the twist. Under current UK law, if this was a partnership involving a gay couple, the inheritance tax laws would not apply as long as the couple had signed a civil partnership agreement. Heterosexual couples, however, cannot seek such an exemption by signing a partnership agreement. In the particular case written about in the Observer, the couple included a "news presenter" who was quite at ease approaching members of the House of Commons about correcting this inequity in the law. The response: "'We can't possibly do that.' They said that heterosexual couples had the option of getting married [and getting the IHT protection that way]. And it would cost the Treasury too much." And so while we have reached the point where society quite openly accepts long-term cohabitation with little or no fuss, public policy demands marriage -- at least among heterosexuals.

I just found the situation fascinating....
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