Various proposals to fix the marriage penalty

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Reprinted from the National Center For Policy Analysis
DAILY POLICY DIGEST
Friday, August 7, 1998

o CONGRESS TARGETS THE MARRIAGE PENALTY, but debate
continues over how -- or whether -- to end it....
INVESTOR'S BUSINESS DAILY

TAX CUT CHOICES

What kind of a tax cut, or combination of cuts, would benefit the
economy? That is the question politicians and economists are
debating as enthusiasm for a cut builds. There are various
proposals to soften the impact of the marriage penalty

o One by Sen. Phil Gramm (R-Texas) would confine a deduction
only to couples with adjusted gross incomes below $50,000,
a cap critics call unfair to higher-income couples who are
hit hardest by the penalty.

o Another plan, being advanced by Rep. Jerry Weller (R-Ill.)
and Rep. David McIntosh (R-Ind.), would create a new
filing status called a "combined return" -- but since it
would require adding a minimum of 40 more boxes to tax
returns, it's being faulted on grounds of making tax forms
even more complex.

Economists are not greatly enthusiastic about marriage penalty
reform, arguing that it would do little to stimulate the economy.
Some, such as the Cato Institute's Stephen Moore, prefer simply
to extend the income tax brackets, forcing people out of the 28
percent bracket and into the 15 percent bracket.

Gary Robbins, of the Institute for Policy Innovation, recommends
that tax-cutters focus on killing the estate tax.

o He argues that the estate tax really hurts small business
owners, who are often forced to sell family businesses --
destroying some 85,000 jobs a year, according to a
National Federation of Independent Business estimate.

o The Heritage Foundation's William Beach figures that
between 145,000 and 230,000 jobs per year "are never even
created because of the estate tax."

Some observers question whether there is enough time left this
year to act on the marriage penalty and estate taxes. There
might, however, still be a chance of getting relief on capital
gains rates.

Source: Aaron Steelman, "The Fight Over Tax Cuts Begins,"
Investor's Business Daily, August 7, 1998.

For more on the Marriage Tax
http://www.ncpa.org/pi/taxes/tax32.html#4

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