Relief from the marriage penalty has been left at the altar

0 Comments | Insight on the News, August 3, 1998 | by David McIntosh

In Insight's June 8 Symposium, noted liberal economist Robert McIntyre took a good whack at legislation my Republican colleagues and I introduced this year to fix the marriage penalty -- HR3734, the Marriage Tax Penalty Elimination Act. In particular, I was troubled by McIntyre's use of misleading calculations and his characterization of our plan as having a second, unrelated agenda to cut taxes for only the very rich.

McIntyre made some statements about HR3734 that are based on deceptive information. He wrote that "two-thirds of their proposed $31 billion-a-year tax cut would go to the best-off fifth of married couples, with average incomes of $184,000 each."

It is true that about two-thirds of the relief in HR3734 would go to the top fifth of married couples. Yet, according to the most recent data from the Statistics of Income division at the IRS, the top fifth of married couples earn at least $75,000 a year. In all fairness, this is a middle-class working family. A cop and a teacher who have been employed in their jobs for about five years would earn around $40,000 a year each, putting them squarely in the top fifth of married couples. I don't think they would consider themselves rich. Nor do I think they should be singled out for higher taxes just because they are married.

Elsewhere in the article, McIntyre understated the extent of the marriage penalty. He said the most common marriage penalty for couples earning up to $60,000 is a lower standard deduction. Indeed, the standard deduction for singles is $4,150 and only $6,900 for married couples. HR3734 raises the standard deduction of joint filers to $8,300 or exactly double that of singles. With this change, more than 22 million married couples with incomes up to $60,000 would see their taxes reduced by $210 each year.

However, the bigger marriage penalties for more than half of these couples are found in the income-tax brackets. Take the 15 percent bracket. Singles are taxed at the 15 percent rate on the first $24,650 of their income. Joint filers are taxed at this lower rate on only the first $41,200 of their income. They must pay the higher 28 percent rate on every dollar earned after that. HR3734 boosts the income thresholds for married couples in all tax brackets. In the 15 percent bracket, that would be $49,300, or exactly double that of singles. About 12 million middle-class couples earning $40,000 to $60,000 would enjoy an extra $1,040 to $1,240 per year by doubling the brackets. Added to the higher standard deduction, that's a tax cut of $1,250 to $1,450 per year.

But it is McIntyre's solution to the marriage penalty that takes the cake. He suggested that a 6 to 7 percent surtax on all taxpayers would offset the cost of repealing the marriage penalty. Is it not enough that Americans are shouldering the highest peacetime tax burden in our country's history?

In an era of budget surpluses, we do not have to raise some taxes to cut other taxes. The House-passed budget resolution contains cuts of $101 billion in wasteful spending cuts during five years to offset $101 billion in tax cuts over the same period. This amount would fully eliminate the marriage penalty from the standard deduction and all the tax brackets. Our government will spend more than $9 trillion during the next five years. It should not be difficult to find $101 billion out of this vast federal budget to return to the taxpayers.

In short, while McIntyre stated that there are better plans to eliminate the marriage penalty, he did not come up with one. Past Congresses have tried to increase taxes on one group to cut taxes on another group, but this approach never has worked. Fairness and equality should be the standards of our tax system. HR3734 takes the important step of removing discrimination from our tax code and paves the way to fundamental tax reform in the future.

David McIntosh of Indiana is chairman of the House Government Reform subcommittee on National Economic Growth.