Your marriage, taxes and many happy returns

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By HOWARD TROXLER

© St. Petersburg Times, published July 28, 2000

Woooooo, doggie! Plenty of folks were mad at my defense of the federal estate tax Wednesday. As one explained patiently to me, "Two million dollars isn't THAT much money." Nonetheless, let us proceed courageously to today's discussion of the "marriage penalty."

Getting rid of the marriage penalty, as the Republicans in Congress propose to do in this election year, is a fine idea. But their method is screwy.

Naturally, the lion's share of the benefit would go to people with the most money already.

And somewhat sneakily, the Republican tax break also gives a reward to an even larger number of "traditional" households where the Little Woman stays at home. Family values, y'know.

Here's how all this works:

The "marriage penalty" hits couples with two incomes. A couple's standard deduction is NOT twice as high as a single person's. Also, higher tax rates kick in earlier for married couples.

A single person in 1999 could claim a $4,300 standard deduction. A married couple filing jointly could claim only $7,200, less than for two single people.

A single person could earn taxable income of up to $25,750 before jumping to a higher tax bracket. A married couple could earn only $43,050 -- averaging $21,525 a person -- before jumping to the higher bracket.

The bottom line:

Some 21-million couples paid an average of $1,400 extra last year, according to the Congressional Budget Office.

But

On the other hand, an even greater number of couples, about 25-million, enjoyed a marriage bonus last year that averaged $1,300.

These households had only one income, or one income much higher than the other. In that case, a single person pays more than a married person with the same income, because of the extra deductions and exemptions.

The simplest way to get rid of the marriage penalty would be to tax each person's income the same way, regardless of marital status. In fact, this was the plan proposed by some Democrats.

However, the Republican majority insisted on a different fix. The Republican bill sets the deductions and tax brackets for married couples at exactly double those of single people.

Sure, this approach gets rid of the marriage penalty for 21-million households. But it also expands the marriage bonus for the 25-million households that were already getting a break.

Meanwhile, for you few die-hard liberals out there: 80 percent of this tax cut will go to households earning more than $75,000 a year; over half goes to those earning more than $100,000. President Clinton offered a plan to give a larger break to lower- and middle-income households but was rebuffed.

Who can argue against a tax cut? Nobody says, "No, I want to give MORE money to the government!" Yet under color of ending the "marriage penalty," the Republicans also get to hand more money back to the well-off, and reward single-income households that comport with their sense of values. Nice work.

Several readers told me I overstated, if not outright misrepresented, one of the claims in my argument Wednesday against repealing the estate tax, and they have a point.

I declared that in large estates, "the majority of the money in question was NEVER taxed. It was built up in investments and trust funds, dividends and interest earnings and capital gains and appreciation."

As anyone with investments can tell you, dividends and interest earnings and capital gains are perfectly taxable. Yes, it IS possible, as I said, that a large estate's assets were never taxed along the way, but it also is possible they were. Thanks to those who pointed this out, even the one guy whose anatomical suggestion I politely declined.

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