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U.S. News Archive
August 28 - August 31, 2000

 

 

 
 

 

This page contains news for the period August 28, 2000 through August 31, 2000.

 

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Thursday, August 31, 2000


Columnist proposes a simple solution to end marriage bonuses and penalties in the income tax code

Today's edition of the San Francisco Chronicle carried a commentary suggesting a solution to the marriage-penalty and marriage-bonus quagmire of the federal tax code.  The column was written by Maya MacGuineas, a fellow at the New America Foundation, a nonpartisan think tank in Washington.

She says that President Clinton was right to veto the marriage penalty legislation Congress sent to him, but not for the reasons he stated. The chief problem with the bill is not that it is too expensive or slanted toward wealthier couples, but that it leaves much of the unfair penalty in place. At the same time, it actually increases the rarely discussed marriage bonus.

MacGuineas argues that the marriage bonus, the one that almost 50 percent of married couples receive for no reason other than marital status and is just as unfair as the marriage penalty. The exaggerated rhetoric on the topic of marriage and taxes leaves many couples bemoaning their penalty, when actually they pay less in taxes than they would if single. The legislation vetoed by the White House addresses only half the problem, while making the other half worse.

According to MacGuineas, both marriage penalties and bonuses are the unintended consequences of a complicated tax system that tries to balance often- conflicting goals. The combination of progressive taxation, where higher incomes are taxed at higher rates and taxing married couples as a single unit leads to inequities in the treatment of couples and singles. The resulting peculiarity is that almost all married couples face different tax liabilities than they would if they were earning the same amount but were single.

Far from punishing all married couples, this arrangement creates almost as many winners as it does losers. MacGuineas gives the example of an individual earning $70,000 who marries a spouse who does not work. The couple's standard deduction increases from the $4,400 deduction for singles to the $7,350 joint deduction. They also qualify for a second personal exemption and wider tax brackets applied to the same single income. All these changes allow more of the worker's income to be taxed at a lower rate. Merely by qualifying as married filers, the couple receives about $4,000 in tax breaks.

Since couples are treated the same in terms of taxes, their taxes are the same as for another married couple with two earners making $35,000 apiece. This dual-earner couple is penalized by the joint standard deduction, which is less than double the single deduction, and progressive taxation, which pushes more of their combined income into a higher tax bracket. As a result, they pay roughly $1,500 extra in taxes.

MacGuineas does not understand why taxpayers should pay either more or less based on their decision to wed -- yet almost all of them do. The Treasury estimates that while 25 million couples are hit with an average annual penalty of $1,100, 21 million couples receive bonuses of a slightly greater amount.

She says that if Congress is serious about addressing tax unfairness, it has chosen a poor strategy to eliminate the marriage penalty. The bill sent to the president increases the standard deduction and widens some income tax brackets for joint filers to eliminate part of the penalty. But not only do these changes fail to remove the penalty entirely, they further reduce taxes for those couples already receiving bonuses.

The $70,000 single-earner couple would receive an additional bonus on top of their $4,000 tax break. MacGuineas says this is hardly an improvement in tax fairness -- particularly at a price tag of $290 billion over the next 10 years, much of which would go to those not being penalized.

MacGuineas suggests that a better approach, and one used in most developed countries, would be simply to tax individuals rather than couples. Under such a system, individuals earning the same incomes would pay the same in taxes, and their liabilities would remain unchanged by marriage.

Addressing a failure of the current legislation, individual taxation would fully eliminate all marriage penalties. And in keeping with principles of fairness, undeserved marriage bonuses would be removed as well. By wiping out both penalties and bonuses, individual taxation would be far less expensive than the current proposal, costing virtually nothing to the Treasury.

As MacGuineas points out in the column, changing the tax code is always challenging, because taxpayers are suspicious that benefits will accrue to someone else at their expense.

If Congress successfully overrides the president's veto, as it will surely attempt to do, singles will certainly have cause to complain. If the goal of marriage penalty legislation is to rid the tax code of unfair treatment of married couples, it will not be achieved by doling out tax cuts indiscriminately to married couples whether or not they are penalized.

On the other hand, taxing individuals would simplify the tax code while ridding it of unjustifiable marriage penalties and subsidies alike.

MacGuineas warns that if Congress chooses to move forward with its boon for married couples, it should brace itself for the ensuing flood of complaints about the resulting ``singles tax penalty.''


National marriage poll shows voters want politicians to strengthen the family

A story published today by Fox News reports that a new study by Alliance for Marriage, a non-partisan, interfaith coalition, found registered voters from different parties favor initiatives intended to strengthen the American family.

Among the results of the Wirthlin National Marriage Poll of more than 1,000 registered Republicans, Democrats and independents: Nearly 60 percent view the state of the family as "not strong"; 64 percent said strengthening families is more important than increasing job opportunities; and 77 percent said strengthening families is more important than creating a cleaner environment.

"What the poll found was that there is a high degree of consensus among Americans which cuts right along party and ideological lines on the importance of family," said Matt Daniels, executive director of Alliance for Marriage.

While "family values" is a campaign battle-cry usually associated with the Republican Party, the Gore-Lieberman campaign has stressed the message for weeks. Gore's passionate embrace of wife Tipper during the Democratic convention and Lieberman's emphasis on faith and morality have made headlines.

The Wirthlin poll also gauged voter support for "initiatives to strengthen families." Eighty-seven percent said they favored encouraging businesses "to offer flex-time / job-sharing / home-based work options," while 80 percent support "recognizing and acknowledging the media when they accurately reflect or portray the positive influence of marriage on the lives of adults and children."

Some 78 percent approve "requiring counseling to married couples with children" before allowing a divorce, while 76 percent support "decreasing taxes for married couples with children" and 63 percent approve of "increasing tax incentives for adoptions."

The results are not surprising, said Karlyn Bowman, a resident fellow at the American Enterprise Institute who studies public opinion and politics.

She observed that two-thirds of the electorate is married. "Things like marriages and mortgages and families bring you into the voting booth," Bowman added.

"You have more of a stake in society. In that sense, paying attention to their views is very, very important."

AASP sent a letter to the author of this article, encouraging the editors at Fox News to bring some balance to the news by writing something about the concerns of single voters.  To read that letter, click here.

 


 

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