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Week Ending April 30, 2004         

HR 4181 To permanently extend the marriage penalty relief provided under the Economic Growth and Tax Relief Reconciliation Act of 2001.

BRIEF

   The bill would make permanent several tax breaks that were signed into law in 2001 for married couples. The breaks are beginning to expire and will end in 2011. The 2001 law doubled the standard deduction for marrieds to twice that of singles, eliminated the marriage tax penalty for homeowners and others who itemize their taxes by expanding the 15 percent tax bracket (marrieds can earn double what a single person owns and pay the same taxes) and phased out the penalty on low-income couples when they utilize the earned income tax credit.  

   The benefits of the bill were accelerated in 2003 to take effect in 2004 when Congress voted to follow the President’s wishes.  A new, $3,000 earned income tax credit would phase in and become permanent over four years. According to the bill’s sponsor Representative Jerry Weller (R-IL) 35 million couples would pay $300 to $700 more in taxes between 2004 and 2011 if HR 4181 did not pass.

   Democrats offered a substitute that would continue the tax breaks but not for couples earning $1 million or singles earning $500,000, yearly. The Republican bill, they said, would add to the deficit and public debt. Their substitute, they said, would pay for itself through collecting from the wealthy couples. The Substitute was sponsored by Senator Charles Rangel (D-NY)

Sponsor: Representative Jerry Weller (R-IL) 

Vote: HR 4181 passed 323 to 95 with 15 not voting. (RC 138)

          The Rangel Substitute failed 189 to 226 with 18 not voting.

Cost to the Taxpayer:. The bi-partisan Joint Committee on Taxation concluded that the tax breaks, should they be made permanent, will cost $96 billion in lost revenues over the next ten years. The bill did not go through the committee process before being brought to the floor for a vote.

MORE INFORMATION

    This bill began its’ journey with the Economic Growth and Tax Relief Reconciliation Act of 2001 that set forth the tax breaks to begin in 2005 and grow through 2010 after which they would end. In 2003 Congress accelerated doubling the standard deduction for marrieds and expanding the 15 percent tax bracket to begin in 2004 but the accelerated relief would expire this year.

   Democrats held that the tax bill’s tax relief is deceptive since couples earning $72,000 and up will find themselves entering the tax bracket that kicks in the Alternative Minimum Tax (AMT)-a tax mechanism that would cost the married couples more than normal. Senator Weller insisted that the AMT is a topic of reform coming up in the next few weeks.

   Democrats also held that the bill, without changing the AMT, would not help 35 million people but rather 13 million middle income families, 26 percent earning $75,000 to $100,000 and 60 percent earning $100,000 to $200,000 would receive little or no benefits. All Rights Reserved. No reproduction in any form without written permission from TheWeekInCongress.com