CU Community Home
Chapters
SAS Credit Unions
Small Credit Union Resources
Scholarship Program
Mentor Program
League SAS Services
SAS Gazette Newsletter
SAS List Serve Sign up
Committees & Task Forces
Resources
Michigan Credit Unions
MCUL/MCUF Awards
Maxwell, Herring, Desjardins Awards
Michigan Credit Union Foundation
MCUL AED Program
Michigan Credit Union League Home » CU Community » SAS Credit Unions » Marketing » Newsletter Help » Tax Tips  

Additional Newsletter Topics
For Better or For Worse: Marriage and the Federal Income Tax

Lori Z. Bahnmueller
Credit Union Village

This past Valentine’s holiday proved fertile ground for House passage of the latest legislation to reform the irksome “marriage penalty” tax anomaly.

Among a handful of plans crafted by both Republicans and Democrats, the winning House GOP bill would cut income taxes for all married couples who file joint income tax returns, not just the estimated 25 million two-earner couples who pay a “marriage penalty.” Those penalized are deemed such because they pay more taxes together—at last count, an average of $1,400 more—than they would have if they had stayed single.

But don’t go spending the extra money just yet. Senate passage is iffy at best, and President Clinton—who launched his own version of “marriage penalty” relief—is threatening a veto over the bill’s cost and timing.

The marriage tax penalty will undoubtedly be the last thing on my colleague’s mind when she exchanges wedding vows with her fiancé this weekend. But if some form of relief is not forthcoming, tax season 2001 may find the newlyweds unwrapping a tax penalty.

The marriage tax penalty enters the joint filer equation in a couple of ways. For example, the standard deduction this year for a single filer is $4,300, but only $7,200 for a couple filing jointly. So after marriage, a couple filing jointly loses $1,400 in standard deductions from their individual 1998 returns.

The tax brackets for married couples are also less than double those for singles. The 28 percent tax bracket extends to $62,450 for a single person but to only $104,050 for a married couple; when two individuals whose earnings put them at the top of the bracket get married, more than $20,000 of income gets pushed into the 31 percent bracket.

While far from eliminating the marriage penalty, the GOP plan marked for Senate consideration promises to provide some much needed relief over the next 10 years, according to the Joint Committee on Taxation.
 Adjusts upward for married couples the bottom 15 percent income tax bracket to
make it double that of single filers by 2008. If it had been in place this year, couples would have paid a 15 percent rate on their first $52,500 of taxable income, compared with $43,850 with current law.
 Raises the standard income tax deduction for married couples who do not itemize to twice that of single filers beginning in 2001. Using this year’s numbers, the deduction would rise from $7,351 to $8,800.
 Raises the income cutoff for lower-income couples who claim the earned income tax credit by $2,000 beginning in 2001.

Complaining that half the GOP bill’s total tax cut would go to couples who already receive a bonus and cut too deep into the estimated $30 billion annual windfall the government enjoys in the name of marriage penalty taxes, House Democrats proffer alternatives.

One plan would have the raised standard income tax deduction for married couples who do not itemize to double that of single filers and made changes in the earned income tax credit so it would not be eroded for the working poor when they make more on the job. But all items were contingent to safe passage of separate legislation protecting Social Security and Medicare and paying down the public debt.

President Clinton has proposed $45 billion in relief, although his plan would not help couples who itemize and is focused on those with double incomes.

With so many plans being hatched, and much creativity employed to remedy this decades-old inequity, couples might entertain optimism that the 2000 tax season will mark the beginning of the end of the marriage penalty. Until then, I will continue to listen for the faint cha-ching of the Treasury cash register after each “I do” witnessed.

For Better or For Worse: Marriage and the Federal Income Tax
Lori Z. Bahnmueller
Credit Union Village

This past Valentine’s holiday proved fertile ground for House passage of the latest legislation to reform the irksome “marriage penalty” tax anomaly.

Among a handful of plans crafted by both Republicans and Democrats, the winning House GOP bill would cut income taxes for all married couples who file joint income tax returns, not just the estimated 25 million two-earner couples who pay a “marriage penalty.” Those penalized are deemed such because they pay more taxes together—at last count, an average of $1,400 more—than they would have if they had stayed single.

But don’t go spending the extra money just yet. Senate passage is iffy at best, and President Clinton—who launched his own version of “marriage penalty” relief—is threatening a veto over the bill’s cost and timing.

The marriage tax penalty will undoubtedly be the last thing on my colleague’s mind when she exchanges wedding vows with her fiancé this weekend. But if some form of relief is not forthcoming, tax season 2001 may find the newlyweds unwrapping a tax penalty.

The marriage tax penalty enters the joint filer equation in a couple of ways. For example, the standard deduction this year for a single filer is $4,300, but only $7,200 for a couple filing jointly. So after marriage, a couple filing jointly loses $1,400 in standard deductions from their individual 1998 returns.

The tax brackets for married couples are also less than double those for singles. The 28 percent tax bracket extends to $62,450 for a single person but to only $104,050 for a married couple; when two individuals whose earnings put them at the top of the bracket get married, more than $20,000 of income gets pushed into the 31 percent bracket.

While far from eliminating the marriage penalty, the GOP plan marked for Senate consideration promises to provide some much needed relief over the next 10 years, according to the Joint Committee on Taxation.
 Adjusts upward for married couples the bottom 15 percent income tax bracket to
make it double that of single filers by 2008. If it had been in place this year, couples would have paid a 15 percent rate on their first $52,500 of taxable income, compared with $43,850 with current law.
 Raises the standard income tax deduction for married couples who do not itemize to twice that of single filers beginning in 2001. Using this year’s numbers, the deduction would rise from $7,351 to $8,800.
 Raises the income cutoff for lower-income couples who claim the earned income tax credit by $2,000 beginning in 2001.

Complaining that half the GOP bill’s total tax cut would go to couples who already receive a bonus and cut too deep into the estimated $30 billion annual windfall the government enjoys in the name of marriage penalty taxes, House Democrats proffer alternatives.

One plan would have the raised standard income tax deduction for married couples who do not itemize to double that of single filers and made changes in the earned income tax credit so it would not be eroded for the working poor when they make more on the job. But all items were contingent to safe passage of separate legislation protecting Social Security and Medicare and paying down the public debt.

President Clinton has proposed $45 billion in relief, although his plan would not help couples who itemize and is focused on those with double incomes.

With so many plans being hatched, and much creativity employed to remedy this decades-old inequity, couples might entertain optimism that the 2000 tax season will mark the beginning of the end of the marriage penalty. Until then, I will continue to listen for the faint cha-ching of the Treasury cash register after each “I do” witnessed.

 
   
MCUL Home About Us Press Room For Consumers Home Contact Us Site Map