Editor’s note: In collaboration with the hard-hitting Washington,
D.C., newsweekly Human Events, WorldNetDaily brings you this special
report every Monday. Readers can subscribe to
Human Events through WND’s on-line store.
By Timothy P. Carney
© 2000,Human Events
Contrary to the claims of President Clinton and Vice President Gore, the marriage-penalty relief bill that Clinton vetoed last month would have given a larger tax break to an average middle-class family than to a wealthy family.
The typical dual-income family — in which each parent earns just over $30,000 and which takes the standard deduction — suffers a marriage penalty of approximately $1,500. That penalty would have been eliminated by the Republican marriage-penalty relief bill.
But Bill Gates and his wife, assuming they itemize their deductions, would receive less than a $1,500 cut in what they already pay in taxes.
The marriage penalty is primarily imposed in two ways: through the impact of the standard deduction and through the income-tax rates themselves. First, the standard deduction for a married couple is not twice as much as the standard deduction for a single person. So two single people living together get a larger combined standard deduction for their combined income than two married people get for their combined income.
Second, the income tax rates do not double for married couples. In other words, Tom and Jill, living together out of wedlock and each making $25,000 per year, pay income tax at the 15 percent rate. But, if they get married, even though they are still making only $25,000 each, their combined $50,000 in income is taxed at 28 percent. That is why the “marriage penalty” is such an apt term for this effect of the tax code.
The Republican bill increased the standard deduction for a married couple to twice the deduction for a single person. It also raised the threshold of a married couple’s income liable to the 15 percent income-tax rate to double the threshold applicable to a single person.
Now, why would this have meant a bigger tax cut for the couple making $60,000 than for Mr. and Mrs. Gates?
Because Mr. and Mrs. Gates almost assuredly itemize their deductions — what with all the money they give to charity — while the couple making $60,000, if they have not yet bought a house, may not. That would mean the $60,000-per-year couple gets the tax cut from the increase in the standard deduction, as well as from the doubling of the 15 percent rate, while Mr. and Mrs. Gates only get the cut from the doubling of the 15 percent rate.
The Republican-led Congress could have made the tax cut even fairer to middle-class families that make $70,000, $80,000 or $90,000 per year, by doubling the 28 percent tax bracket, but it did not.
Despite the Clinton-Gore rhetoric, the Republican bill would not have helped millionaires any more than middle-class families.
To think of it in terms of returning the surplus, imagine that a group of friends each pitched in different amounts to buy a pizza. When the pizza came, there turned out to be more money than was needed. The Republican bill, at best, would have given everybody the same amount of money back regardless of how much they paid in — unless they were a little richer than the others (and itemized their deductions), in which case they would get a little less.
It is also important to understand that the bill would cut taxes for all married couples who either make over $43,000 combined or who take the standard deduction, not just those who suffer a marriage penalty. Under current law, when one spouse earns twice as much as the second, the couple can actually receive a marriage bonus by bumping the first earner’s income down a bracket. Also, if a woman doesn’t work, the man receives a tax break by marrying her and establishing himself as a “Head of Household.”
Those suffering a marriage penalty, receiving a marriage bonus, or not having their taxes affected by marriage, would all have gotten a tax break that was more tilted to the middle class than to the rich, if not for Clinton’s veto.
Because the bill passed by less than the two-thirds needed to override (271 to 156), House leaders have no hope of undoing the veto, but they still may make an attempt in order to get Democrats again on record so close to Election Day.
Subscribe to
Human Events.
