GOP Tax Cut Bedeviled by Marriage Levy

The sweeping tax cut House Republicans are pushing as the party’s signature political issue has come under fire from the core of their political base: conservative pro-family groups angered that the bill does not eliminate the tax penalty many married couples pay.

After years of touting their desire to get rid of the so-called marriage penalty--which costs a couple an average of $1,400 more annually than if the two spouses filed individual tax returns--House Republicans produced a tax bill that would provide only an average of about $240 a year in relief.

In response, Christian activists and other social conservatives have besieged the House GOP leadership with e-mail messages, letters and phone calls, howling that the party is reneging on its commitment to eliminate the marriage penalty.

“It’s a promise made and a promise broken,” said Janet Parshall, spokeswoman for the Family Research Council. “This gives us heartburn.”

The squawking from one of the GOP’s most important constituencies is just one of the many problems bedeviling legislation for a sweeping $864-billion tax cut that is supposed to go to the House floor today. And the furor over the tax bill is a vivid demonstration of how hard it is for Republicans to advance their agenda when they control the House by only a few votes and their own party factions are at war with each other.

Further endangering the tax bill is that, even as conservatives complain that it does not do enough, GOP moderates are asserting that it cuts taxes too much. Faced with the embarrassing possibility of not having enough votes to pass the bill, Republicans scrambled Tuesday to find ways to appease the measure’s GOP critics. Closed-door meetings were under way late into the night, with GOP leaders stressing the need for a united front when the bill finally comes up for a vote.

For moderates, the problem is that the tax cut bill sops up most of the projected $1 trillion in budget surplus that is expected to be available for items other than Social Security over the next 10 years. They want more of the surplus to be used to increase domestic spending, pay down the national debt and leave a margin for error if the windfall is not as big as projected.

Republican leaders, in a concession to moderates, have agreed to lessen by $72 billion the tax cut proposal that the House Ways and Means Committee approved, meaning it would total $792 billion over 10 years. But even with that change, Rep. Michael N. Castle (R-Del.) predicted Tuesday, there are enough moderates opposed to the legislation to kill it.

The dilemma facing GOP leaders is that, with conservatives kicking up such a fuss, it is politically more difficult to make further concessions to moderates.

At issue in the marriage penalty debate is a quirk in the tax code that forces about half of all married couples to pay more in taxes filing jointly than they would if each spouse filed as an unmarried individual. Whether or not a couple is hit by the penalty hinges on a variety of factors. But the families most likely affected are the ones in which spouses earn about the same.

The principal source of the marriage penalty is the structure of federal income tax brackets, which push couples into higher brackets faster than it does individuals. For example, if a husband and wife each has $23,950 a year in taxable income, they would be taxed at a 28% marginal rate for a total tax bill of $8,563. But if they were not married and filed as individuals, each would be taxed at 15%, and pay $3,592 in taxes, for a combined tax bill of $7,184.

What’s more, many couples are at a disadvantage because the standard deduction and other tax breaks for a couple are less than those for individuals. For example, if a couple earning a combined $30,500 a year filed jointly, their personal exemption and standard deduction would be worth $11,800. If they filed separately, each would have a $6,550 deduction, for a total of $13,100.

Eliminating the penalty has become a top goal for religious conservatives, who argue that the tax code rewards unmarried couples living together and is a financial disincentive to marriage. For the last two years, Republican congressional leaders have promoted the idea of ending the penalty, seeing it as a way to please both social and economic conservatives and as an idea less vulnerable to the traditional Democratic argument that GOP tax cuts unduly benefit the rich.

But Ways and Means Committee Chairman Bill Archer (R-Texas), while supporting the idea, has never been among its most fervent champions. He has also trumpeted other, competing priorities, such as cutting the capital gains tax and the estate tax.

As approved by the committee, the tax cut bill would tackle only part of the marriage penalty. It would eliminate the inequity in the standard deduction by increasing the deduction for couples to make it exactly twice the deduction for individuals. That change would be phased in over three years.

After the committee approved the bill last week, conservatives vented their ire. The Family Research Council wrote a blistering letter to Archer calling the marriage penalty proposal “paltry.” The Christian Coalition called it “a grave disappointment.” James Dobson, an evangelical conservative, lambasted the GOP on his nationally broadcast radio show. “I am very disgusted with Congress right now and especially with the Republican Party, because they tell us year and year after year that they are pro-family. . . . But then, when it comes time to vote, they run for the tall grass,” Dobson said.

He urged listeners to call GOP leaders and other members of Congress to demand elimination of the marriage penalty.

The result: A deluge. The phone lines to House Speaker J. Dennis Hastert (R-Ill.) and other GOP leaders were jammed. According to Parshall, one harried leadership aide answered the phone not with a “hello,” but by saying: “Yes, I know. You want to eliminate the marriage penalty.”

The call-in campaign has infuriated House leaders. “We’re not happy with them,” fumed one senior GOP aide.

John Feehery, Hastert’s spokesman, said that GOP leaders tried to explain to Dobson that families would get lots of other benefits from the tax bill, including reductions in tax rates and the estate tax. “He didn’t want to be confused by the facts and decided to blast us on the radio,” Feehery said. But Rep. David M. McIntosh (R-Ind.) has taken up the conservatives’ cause, warning of serious political fallout if Republicans do not do more to reduce the marriage penalty. “Our base, those that get up early and go vote for you on election day, are expecting action” on the issue, he said in a letter to fellow Republicans. “They will be deeply disillusioned and disappointed if we fail to act.”

Broader relief from the marriage penalty would be provided under the version of the tax bill now before the Senate Finance Committee. It would eliminate the marriage penalty after 2004 by allowing couples to choose between filing jointly or as single individuals--whichever is more advantageous.

Even if Republicans settle their disputes, they face a veto threat from President Clinton, who has called for tax cuts of $250 billion. But White House Press Secretary Joe Lockhart hinted Tuesday at some willingness to negotiate a higher cut.

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Times staff writers John Balz, Edwin Chen and Art Pine contributed to this story.