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House Approves Marriage Tax Penalty Bill

The House approved, 269-159, legislation (H.R. 4810) intended to eliminate the marriage tax penalty on July 12. Forty-eight Democrats voted for the bill, which the President has threatened to veto. The Senate began debate on its version of marriage tax penalty relief on July 14 and is expected to complete its consideration of the bill on July 17. The House bill (H.R. 6) stalled in the Senate earlier this year over a disagreement regarding amendments to be offered by Democrats (see The Source, 4/14/00; 4/28/00).

H.R. 4810 is identical to a bill (H.R. 6) approved by the House on February 10 by a vote of 268-148 (see The Source, 2/11/00); however, because H.R. 6 was passed before a budget resolution had been approved, it must be reconsidered as a reconciliation measure—the process required to make changes in tax laws and mandatory spending programs. The marriage tax penalty bill is one of two revenue reconciliation measures scheduled for consideration this year. The Republican leadership decided to move its tax cuts in separate reconciliation bills in an effort to gain passage for tax priorities vetoed last year as part of an omnibus tax package (H.R. 2488).

Before passing the bill, the House defeated, 198-228, a narrower Democratic alternative that would increase the standard deduction for joint returns so that it is equal to twice the standard deduction for single taxpayers. The substitute also would adjust the alternative minimum tax so that it would not cancel out the full benefit of the increase in the standard deduction. It would also provide tax relief to lower-income married couples through changes in the earned income tax credit. The alternative would reduce revenues by $95 billion over ten years.

The House also rejected, 197-230, a motion to recommit the bill with instructions to report it back with an amendment making all tax reductions in the bill contingent on passage of a Medicare prescription drug plan. The motion to recommit reflected an earlier offer made by the President to sign the Republican marriage tax penalty bill in return for their adoption of his Medicare prescription drug benefits package.

The debate on the bill reflected the same arguments put forward earlier in the year. Arguing in support of the bill, Rep. Barbara Cubin (R-WY) stated: “It is a good day for working women….Today we will have the opportunity to vote on a measure that will level the playing field for hard-working husbands and wives. This legislation also includes specific provisions to assist our Nation’s lowest income families. Washington should not be in the business of penalizing families but in providing them with more freedom, more choice, and more opportunity.”

Rep. Sheila Jackson Lee (D-TX) said H.R. 4810 “does less than what it is being purported to do. For example, it will not provide marriage penalty tax relief for the poor of our society who face many hurdles to finding stable footings upon which to build lives for their children and families. In addition to this concern, H.R. 4810 provides a tax break mostly to the very wealthy.”

Due to a glitch in current tax law, some married couples filing a joint return pay more in income tax than they would have been required to pay as individuals. The House bill would address that discrepancy by increasing the standard income tax deduction for married couples filing jointly, making it equal to twice the standard deduction for single filers. Under the legislation, the standard deduction for married taxpayers would be $8,800, an increase of $1,450 over the deduction allowed under current law. The bill also would phase-in an expansion of the lowest tax bracket, the 15 percent bracket, for married filers. In addition, it would expand married couples’ eligibility for the Earned Income Tax Credit. The House version would reduce revenues by $182 billion over ten years.

The Senate legislation includes the House marriage tax penalty provisions, as well as an expansion of the 15 percent tax bracket; however, the phase-in would begin in 2002, a year earlier than the House bill. The Senate bill also would permanently allow married couples who pay the alternative minimum tax to qualify for certain tax credits (see The Source, 3/31/00). The Senate version would reduce federal tax revenues by $240 billion over ten years.

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