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ANNOUNCER: Now Hotpoint presents America’s favorite family comedy “The Adventures of Ozzie and Harriet.”
KWAME HOLMAN: There was a time when TV’s “Ozzie and Harriet” was the model of family life in America. Ozzie was the not-so-hard working dad, Harriet, the stay-at-home mom. Not only did their marriage appear strong it also received a sizable tax break from the IRS. A family with one predominant wage earner still gets a tax break today. But now, more often than not, both spouses are wage earners and in many cases they’re hit with a federal income tax “penalty” because of their married status.
REP. BILL ARCHER, Chairman, Ways & Means Committee: Almost 25 million married couples pay an average 1400 dollars more a year in higher taxes just because their married. And that’s wrong.
KWAME HOLMAN: Bill Archer, chairman of the House Ways and Means Committee, put marriage penalty tax relief at the very top of his “to do” list when his committee returned to work last week.
REP. BILL ARCHER: And fixing the marriage penalty would be the best Valentine’s Day’s present we could give to millions of couples.
KWAME HOLMAN: Congress has struggled to balance taxes on singles and couples ever since it established the income tax in 1913. Fifty years ago it allowed married couples to lower their taxes by filing a joint tax return. Middle income couples benefited most. But over the past 30 years, a dramatic increase in the number of women entering the workforce has tilted the tax code against many two-income couples.
REP. BEN CARDIN, (D) Maryland: We’re in this situation because a prior Congress, before I was a members, decided we wanted to do something to help married couples primarily where one person worked and one person did not. It was a good social policy at the time. So we provided a marriage bonus. And now we have the problems of marriage penalty.
KWAME HOLMAN: Here’s why. A husband with an annual income of $25,000 for example would pay a 15-percent tax on all of it. However, if his wife also earns $25,000, only the first $18,050 of her income is taxed at 15 percent. Her remaining income reaches into the next, higher bracket and is taxed at 28 percent. That’s because the couple’s “combined” income exceeds the ceiling for the 15 percent tax bracket by nearly $7,000. The couple ends up paying 13 percent more in taxes on that money than if they were single — filing as individuals. Their marriage penalty is $904 a year.
REP. NANCY JOHNSON, (R) Connecticut: As a young woman thinking about going to work and I see this all of the time and I see it in the eyes of the young women who come and say to me, look I’ve stayed home with my kids for a while and now I want to go back to work. I have to start part time because I have to care for my kids or I’ve got to start a low paying job. And when you see what it does to us — what happens when we get pushed into the next bracket? You know my husband says to me don’t go to work; you’ll increase our taxes. How insulting! I’ll tell you our tax code and the penalty that it levies on married couples is not only cruel and unusual but it strikes at the dignity of women.
KWAME HOLMAN: But Congress is reluctant simply to scrap that part of the tax code that causes the marriage penalty because it is the same provision that still provides a “bonus” to slightly more married couples.
LINDY PAULL, Joint Committee on Taxation: There are statistics out there…there are studies out there that indicate that half the families who file joint returns do receive a marriage bonus.
KWAME HOLMAN: Still, committee members agreed something needed to be done to provide at least partial relief from the marriage penalty. And so Chairman Archer offered a plan on behalf of committee Republicans, and New York’s Charles Rangel proposed a plan for the Democrats.
REP. CHARLES RANGEL: Mr. Chairman I’m afraid this thing is getting a little too political here. (laughter)
KWAME HOLMAN: The Democrats’ plan, similar to President Clinton’s, would raise the standard deduction for married couples to twice the deduction for single taxpayers, and expand the Earned Income Tax Credit. Overall, the proposal would benefit mostly lower and middle income families. Committee Republicans argued it would give little relief to couples who itemize when they file a return.
REP. JERRY WELLER: The primary reason that most middle class families itemize their taxes is homeownership so if we only help those who do not itemize one half of married couples who suffer the marriage penalty essentially we’re creating a whole new class of folks suffering the tax penalty and that’s the homeowner marriage tax penalty and we certainly don’t want to do that.
KWAME HOLMAN: The Republican plan also would raise the standard deduction for married couples and increase the earned Income Tax Credit. But in addition, it would expand the lowest income tax bracket for couples — the 15-percent rate — to include higher income levels — doing so gradually until it’s double the level for single filers. Under this proposal couples currently paying a marriage penalty would get relief, while couples who receive a bonus would get an additional tax break. Democrats argued against that.
REP. JERRY KLECZKA, (D) Wisconsin: We find out that over half of the benefits go to those who aren’t even paying a penalty. In fact, it’s a bonus on bonus. For the person in my district who’s looking for some marriage penalty relief, when they find out that 84 percent of the benefits of this bill go to those over $75,000 or those earning $75,000 or more a year, they’re not going to be very supportive of this.
REP. JERRY WELLER, (R) Illinois: Let’s wipe out the marriage tax penalty for everyone. It’s all about fairness in the tax code.
KWAME HOLMAN: The partisan debate continued today on the floor of the House of Representatives as Republicans kept their promise to bring Marriage Penalty Tax reform to a vote before Valentine’s Day.
REP. BILL ARCHER: We should fix the marriage penalty right now. Married couples shouldn’t have to wait one day longer to be treated fairly by the tax code.
KWAME HOLMAN: Democrats came prepared with a long list of issues to argue, including the cost of the Republican plan: $182 billion over ten years.
REP. SANDER LEVIN, (D) Michigan: You have the cart before the horse. You have this before Social Security and Medicare relief. The President is going to veto this with red ink because that’s what you would lead to without thinking through where all of this leads, without telling us what is the rest of your plan.
KWAME HOLMAN: Illinois Republican Gerry Weller also came prepared, armed with individual statistics aimed at each democrat who stood and spoke against the Republican plan.
REP. JERRY WELLER: My friend votes against this bill 61,000 married couples, one half of whom are itemizers in the 12th congressional district of Michigan, will not get relief from the marriage tax penalty. You may be able to explain that to them, but I sure can’t.
KWAME HOLMAN: The Republican tactic appeared to wear on the Democrats.
REP. CHARLES RANGEL: Mr. Speaker, it’s been pointed out that Mr. Weller has 92,571 constituents who are Social Security beneficiaries, and certainly if you’re just going to go after giving tax relief, you really don’t care anything about them and those on Medicare.
KWAME HOLMAN: But not all Democrats stood against the Republican plan.
REP. PAN DANNER, (D) Missouri: You know, there is an old saying, death and taxes are both certain, but death isn’t annual. Let us each pledge to bring an end to this unfair and costly tax burden, which is annually placed on married couples. I can certainly think of no better gift that this Congress can give the American taxpayers as we close in on Valentine’s Day than to vote for HR 6, the Marriage Penalty Relief Act of 2000.
KWAME HOLMAN: Late this afternoon, the Republicans’ marriage penalty relief bill easily passed the house, picking up the votes of dozens of Democrats. But the measure’s future is far from certain. President Clinton opposes the Republican approach, and the Senate may decide to take up the marriage penalty only as part of overall tax reform in the weeks and months ahead.