July 29, 2000
Column #987

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 tax reform.

     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 average.

     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% hike.

     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.