TAX CUTS STACK UP
We did it! Congress has passed legislation that corrects two of the worst provisions of the federal tax code: the marriage tax penalty and the death tax. This is a significant achievement, and a victory for American families. The President, however, has said he will veto both tax cuts.
Taking the first budget surplus -- now estimated to be more than $2 trillion – as a starting point, Congress asked the question whether to return this money to those who earned it, or to spend it on more government programs.
Perhaps the best way to illustrate the scope of the tax burden being borne by families is to compare today's rates with that of an average family (relative to its income) four decades ago. In 1955, the total family tax burden was 18 percent. Today, federal payroll taxes and state and local levies have more than doubled that load. The result? A middle-income family today has 25 percent less disposable income than a similar family had in 1955 -- not what I would call family-friendly.
The most egregious example of over-taxation is the marriage tax penalty, which hits 21 million married couples harder simply because they are legally wed, and their combined income pushes them into a higher tax bracket. The average marriage tax forfeit is $1,400 a year -- money that can't be used to help save for a down payment on a house, or childcare or a new car, but is instead going to the tax collector.
I have long believed that marriage should not be a taxable event. Rather than elevating the institution of marriage, one of the foundation stones of our society, tax law has made walking down the aisle a costly journey.
Congress voted overwhelmingly to deep-six this penalty. The legislation doubles the standard deduction to $8,800 and expands the 15 percent tax bracket for married couples to twice that of single taxpayers.
The estate tax, or death tax as it has been labeled, is just as loathsome in a different way. This is a tax that targets people who work hard, sacrifice and save for their families' futures. Repeal of this macabre provision is a second, key component in Congress' efforts to reduce the excessive tax bills faced by working families.
The estate tax is a direct assault on family farms and small businesses -- our local drug stores, dry cleaners, the ranches and restaurants that are so much a part of the fabric of American life. But the Small Business Administration estimates that seven out of 10 family-owned businesses fail to survive from one generation to the next – and cites the estate tax as a major obstacle to a successful transition. Such a tax is unwise as well as unfair. It is a drag on our economy and a drag on job creation.
There's no getting around the fact that the estate tax is confiscatory: These assets already have been taxed -- first when the money was earned, and again when it was invested.
The estate tax imposes a major burden on America's small businesses, particularly closely held-family firms, and on family farms.
Farmers, ranchers and small business owners have to hire accountants, financial planners and lawyers to build a safety net that will protect their families and employees, but too often, these costly measures are not enough to avert disaster.
The death tax is a tax on the American dream: the old-fashioned idea that you can work hard, do well, and give your kids a better chance than you had. Death and taxes may be inevitable, but they shouldn't be simultaneous.
I have been working toward the repeal of these unfair taxes since Texans first elected me to the Senate in 1993. Without a change in the law, the estimated $2.4 trillion annual tax surplus will mean a tax overpayment equal to more than $27,000 for every taxpaying household in the United States over the next 10 years. We can well afford to return a part of that surplus to American families, and we should. The place to start? End the marriage tax penalty and repeal the death tax.
July 14, 2000