Plan would affect 25 million married couples

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The House of Representatives July 20 approved the House and Senate agreement reached on the Marriage Penalty Tax Relief Act of 2000, a plan relieving 25 million married couples of the marriage tax penalty. |ret||ret||tab|

The Senate is expected to approve the legislation and send the bill to President Bill Clinton for his signature or veto, according to a press release from the House Ways and Means Committee.|ret||ret||tab|

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The marriage tax penalty|ret||ret||tab|

The Ways and Means Committee stated that:|ret||ret||tab|

Twenty-five million families pay a marriage tax penalty, according to the Treasury Department.|ret||ret||tab|

The average marriage tax penalty is $1,400, according to the nonpartisan Congressional Budget Office.|ret||ret||tab|

Middle income families are hit hardest.|ret||ret||tab|

Most marriage penalties occur when the higher-earning spouse makes between $20,000 and $75,000 per year, according to the CBO.|ret||ret||tab|

Highlights of the legislation include:|ret||ret||tab|

Raising the standard deduction for married couples filing jointly so that it is equal to twice the standard deduction for single filers. |ret||ret||tab|

Expanding the lowest tax bracket (15 percent) to twice that of the corresponding bracket for single filers. |ret||ret||tab|

Increasing the earned income credit for low-income married couples and making more couples eligible for EIC assistance.|ret||ret||tab|

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Doubling the deduction|ret||ret||tab|

The agreement raises the standard deduction for married couples filing jointly to be twice the standard deduction for single filers. Currently the standard deduction is $4,400 for singles and $7,350 for married couples filing jointly. The bill would raise the standard deduction for married couples filing jointly to $8,800. |ret||ret||tab|

This provision would be effective Jan. 1, 2000, meaning couples would see the benefit of this provision when they file their 2000. This provision would provide $30.7 billion in tax relief in the course of five years.|ret||ret||tab|

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Doubling the tax bracket|ret||ret||tab|

The agreement also expands the lowest tax bracket to twice that of the bracket for single filers. The 15 percent income tax rate in 2000 applies to all taxable income between $0 and $26,250 for singles. The 15 percent tax bracket for married couples filing jointly ranges from $0 to $43,850. |ret||ret||tab|

Under the bill, the 15 percent tax bracket for married couples filing jointly would be expanded to twice the single bracket amount ($26,250 + $26,250 = $52,500). This provision would be phased in over five years, with a portion of the benefit beginning Jan. 1, 2000, Again, couples would see the benefit of this provision when they file their 2000 taxes. |ret||ret||tab|

This provision would provide $44.2 billion in tax relief in the course of five years. |ret||ret||tab|

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Increasing the EIC|ret||ret||tab|

The agreement calls for increasing the earned income credit for low-income married couples and making more couples eligible for EIC assistance.|ret||ret||tab|

In 1999, the EIC provided about $30 billion of public assistance to almost 20 million low-income workers in the form of income supplements.|ret||ret||tab|

For a family with two children in 1999, the check peaks at $3,816 for those with earnings of $12,460 and the credit completely phases out at $30,580 in adjusted gross income. |ret||ret||tab|

The plan would immediately increase the EIC income phase-out threshold by $2,000, increasing existing EIC payments (by a maximum $421) and making more low-income working families eligible for the credit. |ret||ret||tab|

This provision also would be effective Jan. 1, 2000. This provision would provide $6.3 billion in tax relief in the course of five years.|ret||ret||tab|

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Alternative minimum tax |ret||ret||tab|

Because of congressional action last year, married couples and individuals were permitted to offset fully their regular tax liability (without regard to the minimum tax) by personal nonrefundable tax credits, such as child, education and adoption tax credits for calendar years 2000 and 2001.|ret||ret||tab|

Under the agreement, this exemption is extended so that married couples filing jointly may continue this practice for years 2002-2005 for both refundable and nonrefundable tax credits. |ret||ret||tab|

This provision would provide $8.5 billion in tax relief in the course of five years. |ret||ret||tab|

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Impact on the budget|ret||ret||tab|

Marriage tax penalty relief is less than one-half of 1 percent of the projected non-Social Security surplus. The Congressional Budget Office projects that the non-Social Security surplus will be $2.2 trillion in the course of 10 years. Taxpayers would save $89.8 billion in the course of five years, according to the Ways and Means Committee.[[In-content Ad]]