IMPACT OF THE MARRIAGE PENALTY

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Reprinted from the National Center For Policy Analysis
DAILY POLICY DIGEST
Friday, February 12, 1999

o ABOUT 21 MILLION COUPLES PAY $1,400 MORE IN TAXES, on
average, due to the marriage penalty... . HERITAGE
FOUNDATION/INVESTOR'S BUSINESS DAILY

Simply put, higher tax rates kick in at lower income levels for
married couples than for cohabiting singles. That's the nature
of the marriage penalty -- it causes approximately 21 million
American couples to pay an average extra tax bill of $1,400.

The Heritage Foundation's Daniel J. Mitchell is of the opinion
that only a flat tax can end the marriage penalty -- and that is
not in the political cards at this point. So he is suggesting
four short-term solutions that would help alleviate the tax pains
of married couples.

o Letting couples choose whether to file individual returns
-- as nine states and the District of Columbia already
permit -- would result in an annual tax cut of about $30
billion, even though couples would have to figure their
taxes both ways to determine which would produce a saving.

o Requiring couples to file individual returns would take
care of the marriage penalty -- but taxes on couples with
non-working spouses would go up, because the standard
deduction would be only $4,250 for a family with one wage
earner versus more than $7,000 now.

o Give second earners deductions or credits worth perhaps 10
percent of the earnings of the lower-income spouse.

o Raise the standard deduction for married couples to double
the level for single filers -- a move which would cut
taxes by more than $25 billion annually.

Mitchell recommends the last option. The tax code allowed single
taxpayers a deduction of $4,250 in 1998. A marriage-neutral tax
code therefore would allow married couples to protect $8,500 of
their income with the standard deduction; instead, married
couples are allowed to deduct only $7,100.

Source: Daniel J. Mitchell, "How To Fix The Marriage Penalty In
The Tax Code," Backgrounder No. 1250, February 8, 1999, Heritage
Foundation, 214 Massachusetts Avenue, N.E., Washington, D.C.
20002, (202) 546-4400, and "The Marriage Penalty Is a Tax on
Love," Investor's Business Daily, February 12, 1999.

For text http://www.heritage.org/library/backgrounder/bg1250.html

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

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