Austin American Statesman
Senator Kay Bailey Hutchison
July 26, 1999
Freeing Marriage from the Tax Ties that Bind
This year, we're celebrating the 30th anniversary of a number of milestones from a tumultuous year in American history: Apollo 11's lunar landing and Sesame Street emerged from1969. Unfortunately, so did the federal Marriage Tax Penalty. It seems all but certain, though, that this year will be the last birthday of the marriage penalty. It's about time, because this is one of the most ridiculous aspects of a federal tax code that is a shrine to ridicule.
Although very different bills, the tax legislation moving through each House of Congress is similar in one respect: both reduce the marriage tax penalty. There are many ways to tackle this problem, and strong public support for doing so. I introduced two versions this year.
How we got here is pretty simple. Before 1969, married couples effectively split their income for federal tax purposes. As an element of other tax reforms that year, that practice was ended, and the marriage penalty was created. It consists of the extra tax a couple has to pay simply because they file as a married couple rather than as two individuals, and it affects some 21 million couples at an average of about $1,400 per couple.
Almost half of married couples pay the marriage penalty. One direct way of providing them relief, would be to simply expand the standard deduction. This would be particularly beneficial to lower-income families.
Right now the standard deduction is $4,300 for single taxpayers and should therefore be $8,600 for married couples. It's not; it's just $7,200. This inequity ripples through the tax code, as a similar married/single disparity exists for the income to which every marginal rate applies. The very least we should do is correct this problem by changing the standard deduction.
Many, though, are advocating even more dramatic marriage tax penalty repeal. They argue, convincingly, that single-income families are penalized by not being treated as a single economic entity. They argue for a return to income-splitting, averaging the family income between one salary and none and cutting in half the amount of income on which taxes are paid.
The principle is sound. Getting by on a single income has become harder and harder, and the reason is simple: Taxpayers are shouldering the heaviest burden in American peacetime history. Two growing incomes are needed to maintain the same standard of living as our parents' generation maintained on a single income. As a nation we pay more in federal taxes alone than we spend on medical care, food, or clothing. In fact, Washington collects three times more in taxes than the combined profits of America's corporations.
We now know that Washington has collected too much; nearly one trillion dollars too much. That's why, in addition to some form of direct marriage penalty relief, we need an across-the-board tax cut. It's the most powerful family tax relief we could offer. Opponents of across-the-board tax cuts say they are unfair. In fact, the opposite is true. It is not only fair but responsible to give back this tax overpayment as quickly and directly as possible to the taxpayers who sent it to Washington.
Washington is not a corporation that can maintain reserves as a result of a good operating year. Taxpayers are not shareholders who somehow derive greater wealth by stronger earnings of government. We collected taxes for anticipated expenses, and it now is obvious we collected more than we needed. If we do not return this overpayment, the machinery of Washington has only one operating mode: spend. I would rather taxpaying Americans decide how to spend their own money.
There's a lot more to do to ease the tax burden on working families. The stock market boom and growth of IRAs, 401(k)s, 403(b)s, and other retirement programs, has made true capitalists out of married couples at every income level. We should cut the capital gains tax again. Indeed, much of the boom has been fueled by the cut in the 1997 capital gains tax and the stock market is up nearly 200 percent since the Republican Congress made that a priority in 1994. We also must end the death tax that seizes up to 55 per cent of family small businesses, farms, many of which must be sold to pay the government the taxes owed. There's no more un-American, unfair tax than that.
Increasing the standard deductions to undo a mistake we made 30 years ago; cutting taxes for every taxpayer, from whom we've collected more than we needed; another capital gains tax cut and repeal of the Death Tax: That's real marriage penalty relief, and it's what the people should expect of us.