The House voted Wednesday to lower taxes for some married couples, part of an election-year push to lock in some of President Bush’s most popular tax cuts.
The bill, which passed 323-95, would permanently change three parts of tax law that cause some married couples to pay higher taxes than they would as single individuals and reduce their taxes $105 billion over the next decade. Some married couples face a tax increase next year if the changes expire, as scheduled.
“It encourages the values we hold most dear — marriage, family, hard work,” said Rep. Jerry Weller, R-Ill.
The Bush administration praised the bill and asked lawmakers to make more tax cuts permanent.
“Tax relief has greatly helped the economy weather the storms of recent years and fueled the economic recovery under way today,” the administration said in a statement.
House lawmakers expect to debate bills over the next several weeks making other temporary tax cuts permanent, including the expanded 10 percent tax bracket and the $1,000 child tax credit.
Democratic alternative fails
The House voted 226-189 to reject a Democratic fix to the so-called marriage penalty. That version, which would have reduced taxes on some couples by about $206 billion over the next decade, would have kept about 13 million couples from losing part or all of their tax cuts to the alternative minimum tax, which was originally intended to keep wealthy people from sheltering their income but increasingly trapped middle-income families.
Democrats also proposed offsetting the cost of their tax cuts by imposing a 3.6 percent surtax on couples earning $1 million or more. Those couples would still pay less than they did before Bush’s tax cuts, Democrats said.
John Tanner, D-Tenn., said future generations could expect to pay higher taxes because current tax cuts and budget deficits.
“You all are witnessing a generational mugging,” he said.
Fixing the ‘marriage penalty’
The marriage penalty most often affects working couples with about equal incomes who get pushed into a higher tax bracket when their salaries are combined.
In 2001, Congress fixed the problem for some married couples by gradually increasing the 15 percent tax bracket to be double the bracket for single individuals, while also making the standard deduction twice that of singles.
A third change reduced the marriage penalty for low-income couples who receive the earned income tax credit, a benefit that was aimed at lifting the working poor out of poverty.
Last year, Congress made the changes to the 15 percent bracket and the standard deduction effective immediately but only temporarily. The two adjustments will slide back next year unless Congress extends them.
Couples who receive the earned income tax credit and pay a marriage penalty would have to wait until 2008 to get the full adjustment under the Republican bill. Democrats would have accelerated that timetable to 2005.
Couples in higher tax brackets continue to pay some marriage penalty.
The tax cuts for couples designed to fix the marriage penalty also increased the so-called marriage bonus, which results when couples pay less tax together than they would as single individuals.
Joel Friedman, a senior fellow at the liberal-leaning Center on Budget and Policy Priorities, said more couples received a marriage bonus because of the Bush tax cuts. Before the $1.35 trillion tax reduction enacted in 2001, the number of couples paying a marriage penalty roughly equaled the number who benefited from a marriage bonus.
“I feel quite certain that it certainly shifted the balance in favor of those who are receiving a marriage bonus,” Friedman said.