Those families that “work hard and play by the rules” have made wonderful campaign props. Now, however, they are becoming a real nuisance. The problem is that tens of millions of these families are getting in the way of the Clinton-Gore administration’s determination to spend nearly every dime of the hundreds and hundreds of billions of dollars in projected non-Social Security budget surpluses over the next decade.
After seven years of penalizing more than 20 million married couples by forcing them to pay an average of $1,400 per year in additional federal income taxes than they would pay if they lived together as an unmarried couple, the Clinton-Gore administration strongly opposes legislation in the House that would gradually eliminate the two biggest tax impediments to marriage. Sponsored by House Ways and Means Committee Chairman Bill Archer, the legislation, which the House is scheduled to vote on today, would provide $182 billion in tax relief for married couples over the next 10 years.
The marriage penalty derives from two major sources: the size of the standard deduction and the timing of higher tax rates. The standard deduction for a single taxpayer is $4,300, or a total of $8,600 for two singles living together. For married couples filing jointly, the standard deduction for both is $7,200. The tax difference or penalty in the 28 percent tax bracket is nearly $400. An even bigger source of the marriage penalty occurs because higher tax brackets effectively kick in sooner for married couples than they do for couples living together. For example, the 15 percent tax rate applies to only the first $43,050 taxable income for married couples, after which the 28 percent rate kicks in. Meanwhile, two single taxpayers living together can pay the 15 percent rate for the first $25,750 each earns, or $51,500 cumulatively. In this instance, the tax difference is nearly $1,100.
Mr. Archer’s bill would solve both problems. It would increase the standard deduction for married couples to double the level for single taxpayers. This change would occur next year. Beginning in 2003, Mr. Archer’s bill would begin to expand the 15 percent bracket for married couples. By 2008, married couples would be able to apply the 15 percent rate to an income level twice the level below which the 15 percent rate applies for a single taxpayer, thus eliminating the second major source of the marriage penalty. Mr. Archer’s legislation would also make more low-income married couples eligible for the Earned Income Tax Credit.
The president himself has conceded that the marriage penalty is “not defensible.” But his administration is so addicted to the $30 billion in annual revenues it now generates that it opposes anything but “targeted marriage penalty relief.” In a letter to congressional leaders last week, Treasury Secretary Larry Summers said the administration “believe[s] marriage penalty relief needs to be done in the right way, at the right time, with the right framework.” In other words, in tiny steps that offer little real relief. Compared to the 10-year, $182 billion Archer plan, Mr. Clinton’s proposal offers less than $250 million of relief in 2001 and a mere $45 billion over 10 years, after which the marriage penalty would still be afflicting millions and millions of families that “work hard and play by the rules.”
Today, nearly a third of U.S. births are to unmarried women, and the social consequences are severe. It is inconceivable that public tax policy would continue to offer prospective parents tax incentives to avoid marriage. Yet, that is precisely what the administration intends to do. Passing Mr. Archer’s sound legislation will not solve the nation’s illegitimacy problem by itself, but it will go a long way toward removing the tax incentives that discourage marriage.