For marriage and taxes, an uneasy union Congress would end the $1,400 'penalty'


WASHINGTON -- When Christopher Ian Huth married his high school sweetheart at the tender age of 18, his father sat him down to explain the facts of life: You're married now. You'll have to pay more taxes.

"What?" Huth, an Essex electrician, remembered asking incredulously. "I'm already penalized: I'm married, aren't I?"

Now 24, Huth and his wife, Nicole, are one of 21 million American couples socked with an extra tax burden because they are married, $1,400 on average. Their anger -- fueled by Republican political strategists, radio talk shows, and religious conservative groups like the Christian Coalition -- is powering a drive in Congress to eliminate the so-called marriage penalty from the tax code.

"We have to make this a priority," said Rep. David M. McIntosh, a conservative Indiana Republican. "Nobody will stand up and say [the marriage penalty] is a good idea. It's wrong. It's unfair. Let's just bear down and get the job done."

Getting the job done is no simple matter. The marriage penaltyis a byproduct of the graduated income tax, which is designed to take a proportionately bigger bite from a household earning, say, $40,000 than from two singles earning $20,000 each.

No simple solution

Besides, the flip side of the marriage penalty is a "marriage bonus" that accrues to couples in which one spouse earns all or most of the income. That's because the higher-earning spouse gets the benefit of deductions which the lower earner might not have qualified for as a single taxpayer. In fact, there are more couples -- 25 million -- who receive a marriage bonus, averaging $1,300 a year, than there are couples saddled with a marriage penalty, according to the Congressional Budget Office.

Erasing the marriage penalty without killing the marriage bonus or raising taxes on singles could be prohibitively expensive -- $153 billion, according to the congressional Joint Economic Committee. To meet that cost, Congress would have either to cut politically popular programs or to dip into the growing budget surplus, which President Clinton has vowed to save for a long-term fix for Social Security.

"People are looking for very simple solutions to a very complex problem," said William Gale, an economist at the Brookings Institution. "When you make an unconditional, uninformed statement like, 'Any penalty on marriage is a moral outrage,' you're bound to get very confused results."

Despite the difficulty of the task, Republican leaders have made eliminating the marriage penalty their top priority because they see it as a powerful political issue that resonates with the social conservatives who make up their core constituency.

"Obviously, the family groups have a lot of influence with this [GOP] leadership, but the fact is, this is a very worthy endeavor," said Rep. Robert L. Ehrlich Jr. of Baltimore County. "People get this. They really understand it."

In many ways, Christopher and Nicole Huth could be a case study for marriage penalty reform. As he struggles through his fifth and final year as an apprentice electrician, she holds two jobs: as a medical office assistant and as a Pizza Hut manager. Together, they earn about $47,000 a year, roughly divided equally.

If they were not married, they could both file individual income taxes of $23,500, minus the standard deduction for singles of $4,250 each. Their combined taxable income would be $47,000, minus $8,500 in deductions, or $38,500.

But because the Huths are married, they must take the standard deduction for joint filings, $7,100, a figure considerably less than double the $4,250 deduction for singles. That leaves them a taxable income of $39,900 -- $1,400 higher than if they were just living together. More taxable income means a higher tax burden. In the Huths' case, their marriage penalty amounts to $210 a year.

Inequitable tax brackets

At higher income levels, deductions are not the only problem. Tax brackets are also inequitably divided between joint- and single-file earners. Two workers earning $30,000 each not only get a larger standard deduction if they remain single, but the larger deduction keeps them within the 15 percent tax bracket. If they married, part of their combined income would be taxed at 28 percent.Martha Phillips, of the Concord Coalition, a budget watchdog group, said she doubts that many couples are refusing to marry or are divorcing over taxes. But some couples have made a point of adjusting their marital status to the tax code.

In perhaps the most nationally famous instance, David and Angela Boyter of Ellicott City calculated in 1975 that they could divorce in December, on a vacation trip to Haiti, file their taxes as singles, then remarry in January with enough tax savings to pay for a Caribbean vacation.

Until 1969, married people received the best tax breaks. At that time, the Internal Revenue Service allowed couples to divide their incomes and file separate returns. Because they could shift incomes between husband and wife to minimize their total tax loads, couples ended up paying less in taxes than singles.

Congress eliminated the break that year and added the marriage penalty, after actress Gloria Swanson and Vivien Kellems, an elderly Connecticut woman who founded a group of single women called War Widows of America, teamed up in an aggressive campaign to rid the tax code of its "singles penalty."

With a graduated income tax, it's hard to help one group without hurting the other.

"It's a little like taking a wobbly card table, and cutting one leg to make it even," said Grover Norquist, head of Americans for Tax Reform. "By the time you're done, the card table is going to be on the ground."

Complex solutions

So far, proposals range from the $153 billion plan to totally eliminate the penalty, keep the marriage bonus and hold singles harmless, to a much more modest effort to boost the standard deduction for couples but leave the marriage penalty unchanged for higher-income couples that itemize deductions.

House Speaker Newt Gingrich also has suggested dipping into the estimated $39 billion budget surplus to give married couples a tax cut, but Republican budget hawks -- especially in the Senate -- are resisting using any of that money.

Taxpayers such as Christopher Huth say they won't take no for an answer.

"I seriously don't know how it should be done, because I'm not the politician that knows the ins and outs of this," he said. "But I know there are people who do."

The marriage penalty

................. ..... John and Jane .......... John and Jane

................. ..... Unmarried .............. Married

Earnings ........ ..... $60,000 ................ $60,000

Standard deduction .... 8,500 .................. 7,100

Taxable income* ....... 46,100 ................. 47,500

Tax rate .............. 15 percent ............. 28 percent

Taxes owed ............ 6,915 .................. 7,795

Marriage penalty ...... $0 ..................... $880

NOTE: * Earnings, minus standard deduction and personal exemption of $2,700.

SOURCE: Joint Economic Committee

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