Mr. Speaker, I rise today to encourage my colleagues to support H.R. 4181, a straightforward piece of legislation that will provide permanent marriage penalty tax relief. First, I would like to express my gratitude to the gentleman from…
Mr. Speaker, I rise today to encourage my colleagues to support H.R. 4181, a straightforward piece of legislation that will provide permanent marriage penalty tax relief.
First, I would like to express my gratitude to the gentleman from Illinois (Mr. Weller) and his staff for the tireless work that they have done regarding marriage penalty relief over the past years. The dedication of the gentleman from Illinois (Mr. Weller) to providing married couples with tax equality is admirable.
I would also like to convey my gratitude to the gentleman from California (Chairman Thomas) and the Committee on Ways and Means staff and members for their expertise and knowledge in developing and moving forward with this legislation. Their actions over the past years to eliminate the marriage penalty and to increase the child care tax credit has greatly benefited American families and our economy.
Prior to 2001, the Tax Code penalized many married couples by forcing them to pay higher taxes after they married. Two unmarried people living in the same home frequently paid far less in taxes than a married couple with the same income. The 2001 Economic Growth and Tax Relief Reconciliation Act set out to rectify this situation. These penalties would be phased out beginning in 2005. By 2010, the standard deduction and the 15 percent tax bracket for joint filers would be increased to double those for single filers. However, the bill included a sunset provision that eliminated all of these benefits after 2010.
Last year, this Congress took even greater steps to provide tax relief for 35 million hard-working married couples by accelerating this relief. Married couples in 2003 and 2004 received twice the standard deduction for single filers, and the 15 percent tax bracket was doubled to twice that for single filers.
Unfortunately, the accelerated relief provided last year will expire after the 2004 tax year, and all penalty relief is due to expire after 2010 as a result of the 2001 act's sunset provision.
Let me illustrate the effect of our tax policy. In 2001, Mr. and Mrs. Smith each earn $27,000 for a total household income of $54,000. If they filed individually, they would each have a standard deduction of $4,550, or a total of $9,100, and both would fall into the 15 percent tax bracket under the marginal rates at that time. However, if they filed jointly in 2001, they would only receive a standard deduction of $7,600, because the standard deduction for married couples in 2001 was just 167 percent of the individual standard deduction.
Further, the joint income of $54,000 would put them in the 27.5 percent marginal tax bracket. So if they both filed as individuals, their total tax would be $6,734. If they filed jointly, their tax would be $7,110, a marriage penalty of $376.
Under the 2003 act's tax cuts, Mr. and Mrs. Smith could file a joint return in 2003 and 2004 tax years and receive the standard deduction for a married couple of $9,500. This is equal to twice the standard deduction for individuals. They would also fall into the 15 percent rate bracket. As joint filers, they are treated no differently from an unmarried couple.
What will happen to Mr. and Mrs. Smith in tax year 2005? If the standard deduction for the individual remains the same and the Smiths filed separately, they would each have a deduction of $4,750. Their total deduction would be $9,500. That would put them in the 15 percent rate bracket. As a married couple in that tax year, their deduction would be 174 percent of the individual standard deduction. This works out to $8,265. If the 15 percent rate bracket income limit for single filers remained the same, they would return to the 27.5 bracket.
Over the next few years, Mr. and Mrs. Smith would make out better as the phase-in of the marriage penalty relief continued. In 2010 they would return to what they remember as the ``good old days'' of 2003 and 204 when they were treated the same as unmarried couples. Unfortunately, in the following tax year, the rug would be pulled out from under them, and the Tax Code would treat the Smiths in the same inequitable and unfair manner as it did before 2003.
H.R. 4181 will ensure that the marriage penalty relief is not reduced next year and that the relief stays in the law permanently. As a result of this legislation, couples will no longer have to worry about incurring a tax penalty just by getting married.
If we fail to act, more than 35 million married couples will see an average tax
increase of $300 in the 2005 tax year. In 2011, 35 million married couples would see a tax increase of more than $700. In many of our districts, that is the equivalent of a month's rent.
As we all work to help our economy to continue to recover, the greatest error we could make would be to allow an increase on taxes on our families. At a time in our allocating of Federal funds to promote marriage for public assistance beneficiaries, how can we even consider allowing the return to a Tax Code that penalizes married couples?
In conclusion, this is the right bill, this is the right time, and I request all of our Members to support the legislation on final passage.
I thank the gentleman for yielding me this time.
Mr. Speaker, I rise to urge opposition to the Rangel substitute here today. It is unbelievable that just as the economy in our Nation is starting to turn around, seeing increasing jobs, lowering the unemployment rate, higher rates of home ownership, that we are going to be asked through this amendment, through this substitute, to raise taxes on our job creators. According to the Joint Committee on Taxation, this substitute will hit approximately 200,000 individual returns, 75 percent of those returns having small business income, income that can be used to plow back into those small businesses, plow back into increasing the number of jobs at that small business, plow back into that small business for better equipment, better technology, a larger physical facility to handle the operations of that small business. That would be cut. That would be adversely impacted by this substitute.
The substitute also reverses the effects of the President's 2001 and 2003 tax relief. At a minimum, affected families and small businesses will pay a marginal tax rate of 38.6 percent.
Mr. Speaker, now is not the time to stifle economic growth in this Nation through higher taxes. Now is the time to continue economic growth through lower taxes. I would urge my colleagues to vote ``no'' on the Rangel substitute.