'Family values' come to the tax code

House is to vote this week on easing 'marriage penalty.' White House has own version of tax cut.

For Valentine's Day, millions of American couples may get the promise of a tax break as the House of Representatives votes this week to ease the so-called "marriage penalty."

Both congressional Republicans and now the Clinton administration are embracing different versions of the tax cut. This is not to say partisan bickering between Capitol Hill and the White House has suddenly come to an end.

Rather, both sides realize the popular cut is simply good politics, akin to tossing the married public a chocolate kiss - a relatively small and symbolic gesture that everyone nevertheless likes.

"Who could be opposed to marriage?" says Christopher Bergin, editor of Tax Notes, a weekly professional journal based in Arlington, Va.

Especially in an election year, few Republicans or Democrats have the heart to speak out against the targeted relief.

"It's very hard to make a persuasive defense of the marriage penalty," says Robert McIntyre, director of Citizens for Tax Justice in Washington.

Yet despite its emotional punch, experts say the proposed tinkering with the marriage penalty and other bite-size tax breaks demonstrates a "lowest common denominator" approach to tax policy prevailing in Washington, marked by small initiatives and no sweeping reforms.

"It's not a huge, bold, reforming plan. It's something they think they can agree on," says Claire Hintz, senior economist at the Tax Foundation, a tax-policy research organization here.

Moreover, the marriage penalty itself is not the big, clear-cut wrong it's built up to be, say tax experts from across the ideological spectrum.

For some, a marriage bonus

Indeed, almost as many couples enjoy a "marriage bonus." Nor is fixing the penalty as simple as many in Washington imply. Instead, it is just one of the trade-offs in a tax system designed to balance the competing goals of progressivity, equal taxation for equal incomes, and fairness to married and single people.

Both the congressional GOP and White House plans unveiled in recent weeks, for example, clearly favor married couples at the expense of singles.

Historically, this marks another pendulum swing in a tax system that in recent decades has fluctuated between financially benefiting one of the two groups.

Today, couples endure a marriage penalty if they owe more income tax filing a joint return than if they were single and filed separately. About 25 million American couples, nearly half of those filing joint returns, incurred a marriage penalty last year, according to a Treasury Department report. The average penalty was $1,141. Two-earner couples, especially those where the spouses make similar incomes, are more likely to face penalties.

"It is terribly unfair that married couples pay higher taxes just because they're married," said House Ways and Means Committee Chairman Bill Archer (R) of Texas. "There is absolutely no excuse why we can't [fix the marriage tax] ... for millions of married couples right now," he said.

But what politicians such as Representative Archer often do not point out is that an almost equal number of couples filing jointly, 21 million, enjoyed a marriage bonus last year, paying less than they would have if single.

The average bonus was $1,274, government figures show. Couples in which only one or neither spouse works are more likely to reap bonuses, and 80 percent of them did last year.

Both the Republican and White House plans would benefit not only couples who pay penalties, but also millions who now receive bonuses.

This, in turn, would exacerbate what some call the "singles' penalty," or unfair taxation for the unwed. Singles' penalties, already paid by more than 40 million unmarried filers in 1999, would "significantly increase" under the new tax plans, says the Treasury report.

The $182-billion, 10-year House Republican marriage-penalty relief bill, scheduled for a floor vote this week, would address some of the key causes of the marriage penalty: the standard deduction, rate brackets, and the Earned Income Tax Credit (EITC). On average, it would cut couples' taxes by about $450 a year.

About $66 billion of the cut would go to raising the standard deduction for married couples filing jointly to double that of single filers, an increase of $1,450 to $8,800 in 2000.

The GOP bill would also devote more than $100 billion to a gradual expansion of the lowest tax bracket (15 percent) for couples filing jointly to twice that for single filers. When fully phased in, a couple could make up to $52,000 - compared with $43,850 this year - and still pay in the 15 percent bracket.

Finally, the bill would increase the EITC by immediately raising by $2,000 to $32,580 the maximum income of those receiving the credit.

In contrast, President Clinton's marriage-penalty relief plan is smaller and less far-reaching, costing an estimated $45 billion over 10 years.

It would also increase the standard deduction to twice that of single filers, but only for two-earner couples. Mr. Clinton also has a separate plan to raise the EITC earnings limit.

Democrats have criticized the Republican bill, especially the tax-bracket expansion, as too large and granting too many benefits to relatively wealthy couples.

Compared with the GOP bill, the White House plan more narrowly targets low- and middle-income couples.

Family values taxes

For their part, Republicans stress that they seek to make the US tax system more marriage-friendly in order to promote conservative family values.

"The marriage penalty contributes to the breakdown of the family," charged Rep. John Hostettler (R) of Indiana last year. "Loving couples shouldn't have to include the IRS in their decision on whether to get married."

But some experts say such statements merely illustrate the rise of tax politics over tax policy. "How many people look into each other's eyes and say: 'We're not going to get married because of the Internal Revenue Code?' " says Mr. Bergin. "It's not real, but politically it sounds fantastic."

(c) Copyright 2000. The Christian Science Publishing Society

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