[Congressional Record Volume 144, Number 48 (Monday, April 27, 1998)]
[Senate]
[Pages S3654-S3655]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. FORD:
  S. 1989. A bill to amend the Internal Revenue Code of 1986 to 
increase the standard deduction amount to reduce the marriage penalty, 
simplify the filing of individual tax returns, and provide tax relief 
for lower and middle income individuals, and for other purposes; to the 
Committee on Finance.


                   The Marriage Penalty Reduction Act

  Mr. FORD. Mr. President, it is the time of the year when we are 
certain to hear more ideas for tax reform. We're certain to hear many 
colleagues discuss the unfairness of our current tax code. Although 
taxes in this country remain lower than major competitors like the 
United Kingdom, Japan, and Germany, many families feel their tax burden 
has been increasing.
  One of the interesting reasons why some individuals feel squeezed is 
the changing nature of the tax burden over the last few decades. For 
example, individual income taxes--both as a percentage of all federal 
taxes paid and as a percentage of gross domestic product--are at 
roughly the same levels as they were in 1970. Yet during that same time 
period the so-called social insurance taxes or payroll taxes have risen 
dramatically, primarily to fund Social Security and Medicare. And the 
portion of revenues collected from corporate income taxes has fallen by 
an equally dramatic amount. For example, in 1960, we collected $1.89 in 
individual income taxes for every $1.00 in corporate income taxes. By 
1980 this ratio has risen to $3.78 in individual income taxes for every 
$1.00 in corporate income taxes. And today we collect $4.02 in 
individual income taxes for every $1.00 in corporate income taxes. It 
is no wonder individuals feel squeezed.
  As we begin to debate several tax reform proposals this year, perhaps 
none will receive as much attention as the so-called marriage penalty. 
The marriage penalty refers to the aspect of the tax code, which 
results in many married couples paying more in taxes than they would if 
both spouses remained single. Yet few will discuss--and I found this to 
be very interesting--that 51 percent of married couples actually 
receive a marriage ``bonus'', meaning they pay less in federal taxes as 
a result of being married.
  Let me repeat that. Fifty-one percent of married couples--a majority 
of married couples--pay less in federal taxes than they would if both 
spouses remained single. Last June CBO found that 51 percent of married 
couples receive a marriage bonus averaging $1,300 per couple. If they 
were required to file as single individuals, federal revenues would be 
$32.9 billion greater each year.
  CBO also found that 42 percent of married couples are subject to a 
marriage penalty, paying an average of $1,400 more per couple in taxes 
than if both were single, for a total of $28.8 billion per year in 
additional revenues. In other words, fully eliminating the marriage 
penalty costs $28.8 billion per year. However, if both marriage 
penalties and marriage bonuses were eliminated, there would actually be 
a net increase in federal revenues of $4.1 billion per year. Forty-two 
percent of married couples would receive a tax cut, but 51 percent of 
married couples would receive a tax increase.
  There is no way to make a statement about income tax exciting. There 
is nothing you can talk about that brings you out on the edge of your 
seat. I am not going to try to do that. So I am going to put into the 
Record several examples of how couples, both making $20,000 a year and 
filing jointly or filing single, and then one breadwinner making 
$200,000 while his spouse stays home and cares for the children--how 
much less they would pay than the married couple making $40,000.
  I think you can already see the trend is to try to take care of that 
lower income and not increase the bonus, as S. 1285 does.
  CBO found numerous causes for these differentials in tax treatment. 
However, two major factors explain most of the reason why married 
couples are treated differently: (1) the standard deduction, and (2) 
the tax rate schedules. In each case, the cutoff for married couples is 
about two-thirds higher than for single individuals.
  For example, in 1998, the standard deduction is $4,250 for singles 
and $7,100 for married joint filers--about 67% higher, but applying to 
two people instead of one. This has significant implications for 
married couples who do not itemize their deductions. For a couple where 
one spouse earns all the income, this means a deduction of $2,850 more 
than if both spouses were single, giving them a marriage bonus. 
However, for a couple where both spouses have significant income, the 
result is a deduction of $1,400 less than if both were single.
  Similar results occur when comparing tax rates. In 1998 the 15% 
bracket extends to incomes of $25,350 for singles, and $42,350 for 
married joint filers--about 67% higher. Most one-income couples receive 
a marriage bonus because an additional $17,000 is taxed at the lower 
15% level. However, many dual-income married couples will find that 
less of their income is taxed at the 15% level.
  So it is far more complex than some have been led to believe. For 
instance, many married couples currently receiving a marriage bonus 
have the impression that all married couples are penalized. Many 
married couples are unaware that there is such a thing as a marriage 
bonus. But remember--51 percent of all married couples currently 
receive a marriage ``bonus'' and pay an average of $1,300 LESS in taxes 
than if they were single, according to CBO. They tried to eliminate the 
so-called marriage penalty. But they increased the marriage bonus we 
now have for over 50 percent of our filers. Therefore, I think that is 
a little bit unfair for a $200,000-a-year filer to receive an 
additional tax cut where we are just trying to make it even for those 
who make $40,000 or less.

  I believe we should consider taking reasonable steps to address the 
marriage penalty. However, I strongly disagree with the approach taken 
in the leading Senate bill proposed on this topic--S. 1285. S. 1285 
would allow married couples to file ``combined'' returns where income 
can be split 50-50, and each spouse taxed at single rates.
  S. 1285 would add significantly to the complexity of the current Tax 
Code. Last year we went through all of this. ``We are going to reduce 
the Tax Code; we are going to make it simpler.'' We only added almost 
900 pages to the Tax Code last year. We go out here and beat our chest 
and say, ``Oh, we have reformed the Tax Code. We have made it simpler, 
we have given some tax cuts with 900 additional pages.'' No wonder H&R 
Block and CPAs are doing business. We made it so complicated even the 
smartest minds do not want to fool with it.
  S. 1285 would add significantly to the complexity of the current tax 
code, requiring many couples to calculate their taxes under both the 
traditional ``married filing jointly'' category and also under the new 
``combined'' category. But even more troubling, it goes well beyond 
what is necessary to address the marriage penalty. The costs of the 
bill appear astronomical--somewhere in the neighborhood of $40 billion 
per year. For many couples who currently face a marriage penalty under 
S. 1285 their tax burdens would now be even lower than if they were 
both single. In other words, many couples currently facing a marriage 
penalty would find that S. 1285 would not only eliminated the penalty 
but create a new marriage bonus as well.
  And beyond the impact on the marriage penalty, S. 1285 would have the 
effect of actually increasing the marriage bonus for many couples who 
already receive a marriage bonus. Let me provide an example.
  Consider a young, affluent family of four. Spouse No. 1 makes 
$200,000 while spouse No. 2 stays at home to raise their two children. 
They have $30,000 in deductions. According to estimates supplied to me 
by Citizens for Tax Justice, this family currently receives a marriage 
``bonus'' of $3,161, but under S. 1285 the marriage ``bonus'' would 
grow to $4,807.

[[Page S3655]]

  Mr. President, I understand the marriage penalty, I also understand 
the appeal of this issue politically. But why in the world would we 
pass a bill to give a couple making $200,000 the chance to pay $4,807 
less in taxes than if they were single, and claim we are doing this in 
the name of fighting the marriage penalty? It seems that S. 1285 would 
give very generous tax cuts to wealthy married couples who currently do 
not face any marriage penalty whatsoever, Why would we do this?
  I believe there is a much more logical approach. It is a simpler 
approach. It would significantly reduce the marriage penalty, 
especially for lower and middle income families. And it would simplify 
the tax code at the same time. And perhaps most importantly it would 
not give huge tax windfalls to wealthy couples who already receive a 
marriage ``bonus'' under current law.
  Mr. President, today I am introducing the Marriage Penalty Reduction 
Act. My legislation would significantly increase the standard 
deduction, to $6,000 for singles, $9,000 for heads of households, and 
$12,000 for married couples. For many lower and middle income married 
couples who face a marriage penalty, the current standard deduction is 
the single most important reason. Under my proposal, the standard 
deduction would no longer have any role in creating a marriage penalty. 
None.
  There are several advantages to this approach. By setting the 
standard deduction for married couples at exactly twice the level of 
singles, no marriage penalty can occur.
  Mr. President, 70 percent of all individual tax filers currently take 
the standard deduction. In other words, only 30 percent itemize their 
deductions. For married couples who currently take the standard 
deduction, my proposal will grant them a tax cut of at least $735, 
significantly reducing any existing marriage penalty. If this $12,000 
deduction were in effect in 1998, along with the current personal 
exemption of $2,700, a family of four would find that their first 
$22,800 would not be subject to income taxes.
  Let me give a second example. Couple No. 2 is a young, newlywed 
couple. Each makes $20,000 per year, for a total of $40,000. They take 
the standard deduction. Under current law they owe $4,125 in income 
taxes as a married couple, but would only owe $3,915 in combined income 
taxes if both remained single. In other words, current law imposes a 
``marriage penalty'' of $210 on couple No. 2.
  Under S. 1285, couple No. 2 would, in fact, be able to eliminate 
their entire marriage penalty. Their tax bill would be reduced by $210. 
However, under may proposal, since the standard deduction would also be 
raised overall, couple No. 2 would see their overall tax bill decline 
by $765. My proposal would completely eliminate the marriage penalty, 
and also provide tax relief for this moderate income couple.
  There are advantages for some of those who currently itemize 
deductions as well. Of the 30 percent who do itemize, the average 
amount of deductions is about $16,000. However, for married couples 
with itemized deductions under $12,000, they will no longer have to go 
to the trouble of making calculations under the legislation I am 
proposing today. They can simply take the higher standard deduction. 
For many, this will greatly simplify the process of doing their taxes.
  And my proposal will cost significantly less than S. 1285. Most who 
have looked at the issue of tax relief in 1998 understand that S. 1285 
is far more than we can afford. My approach costs far less. I intend to 
ask the Joint Committee on Taxation for an official estimate of this 
proposal. If we are to debate a tax package later this year with a 
significant component devoted to the marriage penalty, it is my hope 
that the proposal I am introducing today can form the basis for a more 
logical, more rational approach, to the issue. It is also an approach 
which costs less and simplifies the tax code at the same time.
  Mr. President, I ask unanimous consent that a copy of this 
straightforward proposal appear in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1989

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Marriage Penalty Reduction 
     Act''.

     SEC. 2. INCREASE IN STANDARD DEDUCTION AMOUNT.

       (a) Standard Deduction Amount.--Section 63(c)(2) of the 
     Internal Revenue Code of 1986 (relating to the basic standard 
     deduction) is amended--
       (1) by striking ``$5,000'' and inserting ``$12,000'' in 
     subparagraph (A),
       (2) by striking ``$4,400'' and inserting ``$9,000'' in 
     subparagraph (B),
       (3) by striking ``$3,000'' and inserting ``$6,000'' in 
     subparagraph (C), and
       (4) by striking ``$2,500'' and inserting ``$6,000'' in 
     subparagraph (D).
       (b) Indexing of Amount.--Subparagraph (B) of section 
     63(c)(4) of the Internal Revenue Code of 1986 (relating to 
     adjustments for inflation) is amended--
       (1) in clause (i)--
       (A) by striking ``(2) or'', and
       (B) by striking ``and'' at the end,
       (2) in clause (ii), by striking the period at the end and 
     inserting ``, and'', and
       (3) by adding at the end the following new clause:
       ``(iii) `calendar year 1998' in the case of the dollar 
     amounts contained in paragraph (2).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1998.
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