July 29, 2000
CONGRESS PASSES MARITAL TAX RELIEF
Congress will send a popular bill to cut taxes
for married couples this week to President Clinton, who has pledged to
veto it. If he does, he will hurt Al Gore's odds of being elected
President, and boost Bush's prospects, since he has pledged to sign the
The bill would cut taxes by $292 billion over
10 years. The Treasury Department reports that nearly half of the 51.4
million couples filing joint tax returns in 1999 paid a marriage
penalty, averaging $1,141. They are couples with both parties working
with roughly equal incomes.
There are 66 marriage tax penalties built into
the law. This bill would eliminate two large ones and trim another.
Consider two teachers earning $26,000 each, who are cohabiting. If they
marry, they suddenly have to pay higher taxes for two reasons. Filing
separately, they can each claim a standard deduction of $4,400, or
$8,800 in all. But if they marry, their standard deduction is only
$7,350. The bill would instantly raise that to $8,800.
Similarly, each of their salaries are in the
15 percent tax bracket if they remain single. But if they marry, the 15
percent bracket applies only to the first $43,850 of their joint income.
The rest is taxed at 28 percent. The tax reform would gradually
increase, over five years, the income covered by the 15 percent bracket,
rising to $52,500, twice the level for single filers.
A poll by Wirthlin Worldwide found that 85
percent of Americans believe that the marriage tax penalty is unfair.
Dr. Richard Land, president of the Southern
Baptist Ethics & Religious Liberty Commission, summarized the moral
issue this way: ''To tax people for being married is counter-productive
and unfair. We should do anything we can do to help promote the
formation and perpetuation of stable families. That is helpful, not
hurtful to society in numerous ways.''
Interestingly, however, neither the Catholic
bishops nor the National Council of Churches have taken a stand on the
trimming of the marriage penalty.
And some leaders of the marriage movement are
opposed to it. ''I would veto it,'' says David Popenoe, Co-Director of
The National Marriage Project at Rutgers University. ''It is a huge tax
break for the rich. I am in favor of ending the marriage penalty. But
this goes way beyond by giving additional tax breaks to joint filers,
when they have only one earner.''
He's right that the law would increase the
so-called ''marriage bonus'' now received by 21 million couples, or 41
percent of married couples. Such couples paid less in taxes than they
would have if they remained single. The bonus averages $1,274 and is
highest among couples with stay-at-home moms.
However, the Family Research Council
disagrees: ''The contribution of a stay-at-home spouse should not be
denigrated by suggesting that individual's contribution is of less value
than the person who brings home the only, or largest paycheck.'' An
increase of the standard deduction or tax brackets ''does not equal the
added responsibility'' assumed by a parent at home. Indeed, a two-income
family earns $58,381 while a single earner family must live on $33,748
On the other hand, the biggest marriage
penalty is paid by poor couples who marry.
Eugene Steurle of the Urban Institute notes
that a single mother on welfare who marries a man earning $8 an hour,
loses her $4,668 welfare allowance, and sees food stamps cut from $3,751
to $2,332, and her Medicaid benefit cut from $4,564 to $2,412. This is
partly offset by getting a new Earned Income Tax Credit of $2,799, and
avoiding $1,380 of income taxes. But the poor family still loses $4,058
or 15 percent of its income by marrying, rather than cohabiting.
However, the bill, which was passed in the
House with 51 Democrats joining Republicans and with seven Democratic
Senators joining Republicans would also increase the Earned Income Tax
Credit of a family earning $30,000 from $493 to $1,199, a huge 143%
That is by far the largest gain in the bill,
and it is targeted at the lowest income Americans. Couples earning
$50,000 to $75,000 would see a tax cut of 7 to 13 percent.
The bill is not perfect. It should reduce the
marriage penalty even more than it does. However, I predict that
if Clinton signs the bill, we'd see three important changes: a reduction
of cohabiting couples, an increase in the marriage rate and a decrease
in the out-of-wedlock birth rate. Marriage penalties were introduced in
1969. Since that foolish step, cohabitation has soared 8-fold, the
marriage rate has plummeted 35 percent and illegitimacy has tripled.
It is time to reverse those trends by honoring
marriage rather than taxing it.
Copyright 2000 Michael J. McManus.