Will 'marriage penalty' relief be left at the altar?

Legislation to remove extra income-tax burden becomes tangled up with other issues.

By , Staff writer of The Christian Science Monitor

Few married couples divorce to avoid the "marriage-tax penalty." But plenty complain about it.

Just possibly, before the fall elections, Congress will remove the unpopular extra income-tax burden paid by many of those "properly married" above what is paid by couples of similar income who are living together without a legal blessing.

The problem is that most of the several bills designed to end the penalty are tangled up with other issues. It has become a partisan Republicans-vs.-Democrats affair.

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The marriage penalty arises from the fact that the standard deduction for a couple is less than the standard deduction for two unmarried individuals. For middle-income families, the penalty ranges from $200 to $1,700 a year.

Altogether, about 25 million couples face a marriage penalty. Almost as many get a marriage bonus when one spouse earns much more than his or her partner, paying less tax than if living together unmarried.

Oddly, it was Congress that created the marriage penalty in 1969 in an effort to end discrimination against singles. Before then, each member of a married couple was considered to enjoy exactly half the income of the pair. So Congress approved a new, more-favorable tax-rate table for singles.

Already, the House has passed a marriage-penalty bill that would cost $182 billion in revenues over the next 10 years.

In the Senate, Finance Committee chairman William Roth Jr. (R) of Delaware tried twice last month to pass a bill cutting taxes by $248 billion over 10 years. It did not, however, win the 60 votes needed to prevent it from being talked to death by Democratic opponents.

President Clinton has threatened to veto either of the bills, asserting that they are too expensive, and would eat up too much of the budget surplus.

That surplus has been projected by the Congressional Budget Office at $27 billion this year and growing. But the latest revenue numbers hint it could easily be twice that as investors reap huge taxable profits in the turbulent stock markets.

The Roth bill would set the standard deduction for married couples at twice that of single people. It would help another 21 million couples now in the 28 percent income-tax bracket by widening the 15 percent tax bracket. This would be phased in over six years starting in 2002.

It also includes marriage-penalty relief for married couples with income low enough to get the earned-income tax credit. At the other end of the income scale, it reduces the probability that those claiming large deductions will be subject to what is called the "alternative minimum tax."

Though labeled "marriage penalty relief," the Roth bill is much broader. "A giant tax cut," says Bob McIntyre, director of Citizens for Tax Justice (CTJ), a Washington think tank.

Moreover, a problem for liberals is that the Roth bill gives most of its benefits to couples with higher incomes - those who pay the bulk of income taxes.

According to CTJ, only 15 percent of the tax benefits would go to those earning less than $50,000 per year. This group accounts for 45 percent of all married couples.

By contrast, the third of married couples with incomes above $75,000 would get more than two-thirds of the benefits.

Probably every politician in Washington wants to be seen as backing marriage-penalty relief.

But both parties want to use the issue as a vehicle for other favorite legislative ideas. In the Senate, the Democrats submitted 10 amendments to the Roth bill. These include everything from natural-disaster assistance to a prescription-drug benefit for Medicare recipients.

The Clinton administration, the Senate Finance Committee Democrats, and Senator Evan Bayh (D) of Indiana, are proposing less-expensive plans.

Mr. Bayh calls his bill "simple, targeted, affordable, and fiscally responsible." It would eliminate the penalty on earned income for more than half of married couples in 2001 and for all families with incomes up to $120,000 by 2004. It would cost some $90 billion to $100 billion over 10 years.

How all this will end on Capitol Hill is "quite unclear," says Iris Lav, an expert at the Center on Budget and Policy Priorities in Washington.

Experts speculate that Senate Republicans will attempt to make the Roth legislation a "reconciliation bill" in July which needs a simple majority vote.

Eventually the White House and congressional Republicans may have to work out a deal.

(c) Copyright 2000. The Christian Science Publishing Society

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