Withholding error calls attention to "gay tax"

The letters arrived just before Christmas, but they were no gift.

Signed by a Yale payroll manager and dated December 22, the letters informed about 60 employees that they had mistakenly been overpaid throughout 2010. As a result, the employees owed thousands of dollars each, which they would need to repay pronto—making their upcoming paychecks much smaller than expected. Still, it was an innocent mistake, and had it happened to a different group of people, it would probably never have come to anyone else's attention.

But those affected are gay and lesbian employees, and the technical slip-up cast a spotlight on a discrepancy between how the state and federal governments treat same-sex couples. The event has spurred calls for Yale to help shield employees from what gay-rights activists call the "gay tax."

The employees' tax debt came about because, while they are legally married under Connecticut law, the federal government doesn't recognize their marriages. Therefore, they must pay federal income tax on the value of their spouses' health care—a benefit that is tax-free for opposite-sex couples. Yale forgot to withhold those taxes in 2010, discovering the mistake only as the year was ending. The university hastily paid Uncle Sam, then notified the employees that it would recoup the debt from their paychecks in January, February, and March. Anecdotal reports peg the debt for individual employees in a range from about $1,200 to $3,000.

"On principle, it happened because of discrimination," says one employee who asked not to be named. "That's not Yale's fault, but it's why we're at this point." As a practical matter, the employee adds, "I can't afford it."

After employees protested in early January, representatives of a gay and lesbian staff organization met with administrators, who apologized and offered to extend the repayment period for individual employees on a case-by-case basis.

Some employees (and the Human Rights Campaign, a leading national gay-rights group) are asking Yale to boost compensation to cover part or all of the "gay tax." A few for-profit companies, among them Google, Facebook, and Bain & Company, cover the tax for same-sex domestic partners; educational institutions that do so include Syracuse University and Bowdoin College.

In a follow-up letter to the affected employees, Michael Peel, Yale's vice president for human resources, noted: "It is not normally the employer's role to reimburse employees for taxes required." But Peel seemed to leave the door open a crack: "That said, we will continue to review this issue, as well as to examine how other progressive organizations are approaching it." Meanwhile, Yale has put the topic of equitable federal tax treatment on the list that its officer for federal relations will raise with the congressional delegation.