During the week of April 10—in a run-up to the annual tax filing deadline of April 15—the Senate is expected to consider a measure (as-yet-unnumbered) designed to alleviate the marriage tax penalty. The Senate Finance Committee approved the bill by a party line vote of 11-9 on March 30.
A similar measure (H.R. 6) was approved by the House on February 10 (see The Source, 2/11/00, p. 1). However, the Senate version would reduce federal tax revenues by $240 billion over ten years, while the House bill would cost $182 billion over ten years. The less expensive House measure has already been criticized by the Clinton Administration as fiscally irresponsible.
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. Both the Senate and House bills aim to address that discrepancy with several provisions that were included in an omnibus tax measure (H.R. 2488) vetoed last year by the President.
Both bills would increase the standard income tax deduction for married couples filing jointly, making it equal to twice the standard deduction for single filers. Under the bill, the standard deduction for married taxpayers would be $8,800, an increase of $1,450 over the deduction allowed under current law.
Married couples’ eligibility for the Earned Income Tax Credit (EITC) would be expanded under both bills. Currently, married filers with an annual income of more than $30,580 are ineligible for the EITC; the legislation would raise that ceiling by $2,000.
In addition, both bills would phase-in an expansion of the lowest income tax bracket, the 15 percent bracket, for married filers. For the 2000 tax year, the 15 percent tax bracket would include married couples with an annual income up to $43,850 and individuals with an income up to $26,250. The threshold for married couples would eventually be increased to $52,500—double the corresponding threshold for single filers.
However, the phase-in would begin in 2003 under the House bill and 2002 under the Senate bill. The Senate bill also contains a provision to permanently allow married couples who pay the alternative minimum tax (AMT) to qualify for certain tax credits, including the child tax credit, the dependent care credit, the adoption credit, the credit on certain home mortgages, the Hope Scholarship credit, and the District of Columbia first-time homebuyers credit. Although current law bars those who pay the AMT from taking these credits, Congress repeatedly has approved temporary exemptions. The current exemption is effective until 2001.
During the mark-up, the committee defeated, 9-11, a Democratic alternative that would have reduced tax revenues by $150 billion over ten years. The amendment would have allowed married couples to use a joint return for filing as individuals. Supporters of the defeated amendment asserted that it would have benefited only the couples subject to the tax penalty, while the committee-approved package would benefit couples who are not subject to the penalty—such as married couples with one wage earner who pay less filing jointly than if they filed as individuals.
