WOMEN COULD USE A TAX BREAK, TOO
One of the most interesting and positive aspects of the taxpayer refund proposal that Congress just passed is the way it responds to the needs of women, in particular. Whether they're married, single, homemakers, employees or employers, women are big winners under this plan.
Lowering taxes, as Congress proposes to do in order to refund a small portion of the $1 trillion taxpayer overpayment, means women as well as men taxpayers will be able to hang on to more of the money they earn, rather than send it to Washington so someone else can decide how to spend it.
Opponents of the congressional plan to lower taxes cite Medicare and Social Security and their impact on women, because women live longer. But Congress' plan allocates more than $2 TRILLION to the long-term solvency of Medicare and Social Security. The non-partisan Congressional Budget Office estimates that the congressional plan will cut the federal debt in half in 10 years.
The highest priority of Congress' plan is marriage tax penalty relief, which is approached in several ways. For instance, right now the standard deduction is $4,300 for an individual. If two taxpayers happen to marry, their standard deduction is not the $8,600 one might expect ($4,300 twice). Instead, it is $7,200. Congress' plan phases out that unfairness for those who choose the standard deduction rather than itemizing.
It also would double the income levels for the lowest tax bracket. Two unmarried people earning $25,000 each are taxed at a marginal rate of 15 percent, but when they marry, the government taxes their combined income at a rate of 28 percent. We want to end that by expanding the size of the 15 percent tax bracket. This would prevent a working wife's income from being taxed at the higher marginal rate.
The plan includes another great innovation, one that helps women make extra contributions to their pensions and other retirement savings programs. Women who do not work outside the home have been at a disadvantage when it comes to pension savings programs such as IRAs and 401(k)s. We began addressing this problem three years ago when my Homemaker IRA plan became law. This allows stay-at-home spouses to set aside the full $2,000 for retirement, just as their working spouses can, rather than the $250 allowed them before.
Women who work outside the home go off the savings track when they leave the workplace to raise children. One result can be that women end up with smaller pensions when they retire. We want to recognize this disparity by permitting "catch-up" payments for those who return to the workforce. Congress' plan allows women who return to work after raising their children to contribute as much as 50 percent more per year to their pension plans.
Women remain the primary care givers for elderly family members. Congress' plan will help them bear the costs of home-based care more easily if a loved one faces long-term illness. Congress' proposal also allows an additional personal exemption for those caretakers of elderly family members, and it permits people to deduct the cost of long-term care insurance.
Finally, Congress' tax relief plan would help women by recognizing that they constitute the fastest growing segment of business owners in America. The plan would allow the self-employed to deduct the cost of their health insurance, making it possible for a greater number of people to get health care coverage, and it would phase out the death tax so women business owners, as well as men, can pass their success on to their children.
Congress and the White House agree that two out of three dollars in the expected surplus over the next 10 years will be dedicated to saving Social Security. The debate is over the remaining dollar. Congress wants to give a quarter of it back to those who worked so hard to send it to Washington and use the rest for even more debt reduction and Medicare stability. The plan is balanced, and it's fair. And the big winners will be women.
August 9, 1999