Tax Cut for Couples Put on Hold in Senate Face-Off

The “marriage penalty” has become the tax policy equivalent of drunken driving: Everyone in Washington seems to be against it.

But even so, legislation to cut taxes on married couples has stalled in the Senate, offering a spectacular illustration of just how hard it is for Congress to get anything done in this election year.

Republicans pushed hard for a vote this week on their $248-billion tax-cut plan for married couples, but they temporarily shelved the bill Thursday rather than bow to Democratic demands that the Senate also vote on a much more controversial plan: President Clinton’s proposal to create a Medicare benefit for prescription drugs.

The face-off was a vivid preview of a broader budget debate expected to drive a wedge through Congress for the rest of this year. And the battle lines for that larger debate were drawn Thursday when both the House and Senate passed guidelines for a $1.8-trillion budget that calls for less in domestic spending and more in tax cuts than Clinton wants.

Clinton attacked the GOP budget resolution in a speech to the American Society of Newspaper Editors, saying that the plan “takes us in the wrong direction” and does too little to shore up Social Security and Medicare.

The debate on the marriage penalty concerns a legal quirk that causes many couples to pay more in taxes simply because they are married. Government officials say that about 42% of all joint filers pay an average of $1,400 more annually in taxes than they would if they filed separately as singles. Conversely, many other joint filers, especially when one spouse does not work for pay, receive a marriage “bonus” and pay less in taxes after marriage.

The bill before the Senate would provide $248 billion in tax cuts over five years by increasing the standard deduction for couples, allowing more of them to qualify for the lowest tax bracket and expanding tax credits for working poor couples.

Clinton and most Democrats oppose the GOP-drafted bill because, they argue, it would cut taxes not just for couples hit by a tax penalty but also for those receiving a marriage bonus.

Still, the real hang-up was not over the particulars of the tax cut but the bid by Democrats to offer several amendments to the bill, including one to take $40 billion from the tax cut to finance a Medicare drug benefit.

“Should we spend $248 billion on a marriage tax relief bill, 60% of which does not go to those who experience the marriage penalty?” asked Senate Minority Leader Tom Daschle (D-S.D.). “If you’re going to spend all that money, we’ve got a whole list of other things we think we should be paying for.”

Senate Majority Leader Trent Lott (R-Miss.) viewed the Democratic demand as a political ploy designed to put Republicans on the spot on the drug benefit and other politically sensitive issues. He attempted a procedural maneuver that would have prevented Democrats from offering amendments unrelated to the marriage penalty.

But with 60 votes needed for the maneuver to succeed, it received 53 ayes and 45 nays. After that defeat, Lott shelved the bill at least until the Senate returns from its spring recess in late April, and probably longer.

“It’s a delay, not death to the bill,” said Sen. Sam Brownback (R-Kan.). “We’re going to keep bringing this up until it passes.”

The budget resolution passed Thursday was a compromise hashed out by House and Senate GOP leaders after each chamber passed its own version. It was approved in the House, 220 to 208, and in the Senate, 50 to 48. Both votes largely followed party lines.

The measure does not have to be signed by Clinton. It sets spending and revenue targets that will guide the specific appropriation and tax bills Congress writes later this year.

The budget does leave room for potential compromise on Clinton’s drug benefit proposal. But Clinton’s biggest objection is that the GOP budget includes at least $150 billion in tax cuts over five years.

Clinton, whose own budget includes about $100 billion in tax cuts, mostly offset by increasing tax revenue in other areas, said the GOP plan “is loaded with exploding tax breaks and untenable cuts in critical investments.”

Although the GOP plan calls for increases in spending for defense, education and biomedical research, it would freeze or cut spending in other domestic programs. Indeed, even some Republicans are worried that their budget is unrealistically stingy. A protracted fight seems likely this fall just as lawmakers will be chafing to adjourn for the election campaign.