President Vetoes Bill on ‘Marriage Penalty’ Tax

President Clinton vetoed a Republican-backed bill Saturday that would cut taxes for most married couples, crystallizing an election-year debate over how to parcel out the fruits of the burgeoning federal budget surplus.

Clinton had denounced the measure when it cleared Congress last month, and in his veto message he chided it as “the first installment of a fiscally reckless tax strategy.” Pressing his case that the size of the tax cut would hinder efforts to overhaul the Social Security and Medicare programs, he said, “We can’t retreat from this opportunity of a lifetime to keep our economy strong and move our country forward.”

The bill was the first of a trio of tax relief measures to reach Clinton that top the Republican congressional agenda. The other two, which the president also opposes, would repeal the inheritance tax and reduce taxes for some Social Security recipients.

Arguments about these bills should echo throughout the rest of the 2000 campaign, with Republicans asserting that it’s only fair that much of the federal budget surplus be returned to taxpayers, while Democrats counter that the GOP proposals are imprudent and skewed toward the affluent.

In a sign of the rhetoric to come, Republican presidential nominee George W. Bush quickly blasted Clinton’s veto and sought to use it against Vice President Al Gore, his Democratic rival in the November election. Bush, campaigning Saturday in the key state of Michigan, said the veto shows that the Democrats stand “on the side of big government.”

Bush added: “Had I been the president . . . I would have signed that bill.”

The Gore campaign responded with a line of attack that speaker after speaker can be expected to provide at next week’s Democratic National Convention in Los Angeles. Gore spokesman Chris Lehane said Bush’s support of the GOP bill shows that he “wants to give millions of dollars of tax benefits to the wealthy but only pennies to the working class.”

Gore, like Clinton, supports more modest tax relief targeted to less affluent married couples. And, like the president, he argues that the bulk of the budget surplus should be used first to shore up Social Security and Medicare.

Clinton clearly had Bush in mind in his veto message, putting to his own use a phrase from the Republican’s acceptance speech at the GOP convention Thursday.

The president, in criticizing the array of GOP tax cut proposals, said, “That is not the way to continue our efforts to use these good times for great goals.”

Bush, in making his case that the Clinton administration “has coasted through prosperity,” pledged in his acceptance speech to “use these good times for great goals” as president.

Clinton announced his veto of the tax cut for married couples in his weekly radio address, which was broadcast as he prepared for a round of golf during a weekend vacation and fund-raising trip to the island of Martha’s Vineyard.

He contended that the GOP bill “provides little relief to families who need it most, while devoting a large fraction of its benefits to families with higher incomes.”

Saying, “I support tax cuts but tax cuts we can afford,” he reiterated his pledge to work with Congress on a compromise, especially if Republicans agree to a plan of his liking that helps Medicare beneficiaries pay for prescription drugs.

But GOP congressional leaders so far have signaled little willingness to negotiate with Clinton, in part because of the political appeal they believe their tax cut proposals will have with voters.

Indeed, House Majority Whip Tom DeLay (R-Texas) said the chamber’s “first order of business” next month upon returning from its summer recess will be an attempted override of Clinton’s veto.

Such an effort is expected to fail. Although the push to cut taxes for married couples attracted support from some Democrats in the House and the Senate, the votes fell short of the two-thirds margin needed to override a veto.

Clinton, in his veto message, singled out a remedy for the so-called marriage penalty as among the issues he wants to negotiate with Republicans.

Under the current tax code, about half of all joint filers--nearly 25 million couples--pay higher taxes than if they had filed as individuals. This quirk generally affects couples whose incomes are roughly the same.

Republicans focused on eliminating the marriage penalty as the main rationale for the tax cut bill they pushed through Congress. Bush has joined the chorus; on Friday at a rally in Ohio he said, “What kind of a tax code is it that discourages marriage?”

But the bill sent to Clinton also would have cut taxes for an estimated 21 million couples who enjoy a “marriage bonus”--paying less as joint filers than they would as individuals. This generally occurs when one spouse earns all or most of a couple’s income.

Under congressional procedures, the GOP measure had a five-year limit, and over that period it would have reduced federal revenues by an estimated $90 billion. But assuming that the tax cut would be made permanent, Clinton has sought to spotlight its long-range effect, noting that over 10 years it would cost the government about $292 billion.

Referring to the bill he vetoed and other GOP tax cut measures, Clinton said, “On Capitol Hill, the Republican majority has passed a series of expensive tax breaks to drain nearly $1 trillion from the projected surplus.”

And referring to an across-the-board tax cut plan Bush has proposed, the president said, “On the campaign trail, they are proposing over another $1 trillion in tax giveaways.”

Said Clinton: “We can’t afford a $2-trillion U-turn on the path of fiscal discipline and economic progress.”

The Congressional Budget Office recently estimated that the federal budget surplus would reach $2.17 trillion over the next decade, $30 billion more than the White House budget office had forecast just a month earlier.

With the surplus estimate in mind, Republicans were poised to pounce as Clinton announced his veto.

“The president opposes returning the surplus to the American people through tax relief . . . because he wants it for more Washington spending,” DeLay said. “It’s just that simple.”

In the GOP radio response to Clinton’s address, Rep. J.D. Hayworth of Arizona said, “The good news is that Americans will elect a new leader this November, a leader who will work with Congress to enact much-needed reforms like ending the marriage penalty.”

Part of the reason for the penalty lies with the standard income tax deduction, which is $4,400 this year for single filers. But for couples, it is $7,350. The GOP bill would have raised the deduction for couples to $8,800, to make it double the figure for single taxpayers.

The legislation also would have expanded the lowest 15% taxpayer bracket over five years to cover more couples. And it would have expanded the earned income tax credit for low-income couples.

The GOP bill to repeal inheritance taxes has cleared both houses of Congress, but Republican leaders decided to delay sending it to Clinton until September.

The bill cutting taxes for about 20% of the nation’s Social Security recipients has passed the House and awaits action by the Senate. It would repeal a 1993 law that requires seniors whose incomes exceed $34,000 for singles and $44,000 for couples to pay more in taxes on Social Security benefits.

Clinton’s visit to Martha’s Vineyard began Friday and is scheduled to end Monday evening. It was built around separate fund-raising parties--for First Lady Hillary Rodham Clinton’s New York Senate campaign and for Kathleen Kennedy Townsend, the Maryland lieutenant governor who is expected to seek the state’s governorship two years from now.

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Times staff writers Lisa Getter and Maria L. La Ganga contributed to this story.