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House Approves Marriage and Welfare Tax Benefits

On May 21, the House approved, 409-1, legislation (H.R. 4626) that would accelerate the marriage tax penalty relief deduction and would combine the Work Opportunity Tax Credit (WOTC) and the Welfare-to-Work Tax Credit. The bill was approved by the House Ways and Means Committee on May 2 (see The Source, 5/3/02).

Under current law (P.L. 107-16), the basic standard deduction for married couples filing a joint tax return will increase to twice the basic standard deduction for a single individual by 2009. The increase is scheduled to be phased-in over five years beginning in 2005. The Encouraging Work and Supporting Marriage Act (H.R. 4626) would accelerate the increase of the basic standard deduction for married couples filing jointly to begin next year. Specifically, the bill would increase the standard deduction for married couples to 170 percent of the standard deduction for single filers for 2003 and 2004.

The WOTC allows employers to take a tax credit of up to $2,400 for hiring individuals from certain targeted groups, including families who receive benefits under the Temporary Assistance for Needy Families (TANF) program, high risk youth, qualified ex-felons, and individuals on food stamps. Welfare-to-Work Tax Credit is available to employers of qualified long-term family assistance recipients under TANF. H.R. 4626 would combine the WOTC and the Welfare-to-Work Tax Credit beginning in 2003. According to Ways and Means Committee documents, “Combining the credits and harmonizing the rules will eliminate burdensome calculations and often-duplicative compliance responsibilities.” Instead, employers would be able to look at one set of uniform regulations when hiring individuals from any of the targeted groups.

Under current law, employers can claim the WOTC for hiring certain food stamp recipients between the ages of 18 to 25. The bill would raise the age limit for qualified food stamp recipients to 30.

“I am a supporter of the measure that is in front of us,” stated Rep. Richard Neal (D-MA). “But what we are not voting on here today, and what we should be voting on here today, and what we have been prohibited from voting on for the last few weeks is a way to ensure that while providing for this tax relief that we do not steal from the Social Security and Medicare trust funds,” he added.

“I would remind my colleagues that today we are focusing on eliminating the marriage tax penalty and giving welfare recipients the opportunity to go back to work,” responded Rep. Jerry Weller (R-IL). “I would also note this legislation is paid for through the budget which the House has adopted which allows for an additional $28 billion in tax provisions,” he said. “It is estimated this provision will cost $1 billion or less,” he added.

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