Zeev's Turnips Talk Politics (ZTTP)

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No Tax Relief in Sight for Married Poor
By Jonathan Nicholson

WASHINGTON (Reuters) - Even as Congress has acted in recent weeks to give tax breaks to businesses, owners of stocks and wealthy heirs, millions of poor couples with children will likely have to wait for an easing of the tax code's penalty for being married.

If a current move to expand the child tax credit for poor working families became law, the proposal to make marriage less financially burdensome for similarly low-income couples would have the distinction of being the sole provision of President Bush (news - web sites)'s 2001 income tax cuts not accelerated ahead of schedule.

There's little movement on Capitol Hill on the issue and the Bush administration, which left the provision out of its original tax cut plan, has shown no interest in raising it.

The result: an estimated 3.65 million poor couples receiving the earned income tax credit may have to wait years to reap what experts say is even "modest" marriage penalty relief. Aid for middle and upper income couples, without a wait, was included in May's $350 billion tax cut.

"I'm not quite sure how this got lost in the shuffle," said Lawrence Zelenak, a law professor with Columbia University and a former professor in residence at the U.S. Internal Revenue Service (news - web sites).

"You'd think this would be something where different political factions could come together," he said.

Robert Greenstein, executive director the liberal-leaning Center on Budget and Policy Priorities, said, "How do you explain accelerating everything else, but not that?"

WAIT FOR 2008

The earned income tax credit was created in 1975 to offset the burden of payroll taxes on the poor by use of a refundable tax credit. Eligibility for the credit depends on income, with the maximum benefit available for couples with two or more kids and up to $14,550 in annual income. Eligibility for any credit gradually ends at a bit over $34,000.

Because the levels at which the credit is phased out differ from singles to marrieds, two single parents who marry get a smaller credit than if they had stayed single.

For example, two single parents with one child, each making about $13,000 annually, are each eligible for a credit of $2,506, or $5,012 total. But the combined credit for a married couple with two kids is only $1,728 -- a marriage penalty of $3,284.

In the 2001 Bush tax package, the penalty was to be eased somewhat by raising the phaseout levels of marrieds over singles by $3,000. But that increase was to be gradually phased in, with increases still due to come in 2005 and 2008.

"EVEN BETTER FOR AMERICANS TODAY"

In his State of the Union speech in January, Bush spoke out against marriage penalties in the tax code, saying, "Instead of gradually reducing the marriage penalty, we should do it now."

"If this tax relief is good for Americans three, or five, or seven years from now, it is even better for Americans today," Bush said.

While the earned income marriage penalty issue has languished, the child tax credit, which was also not included in the administration's original tax cut plan, has garnered White House support. The Senate voted 94-2 in early June to allow poor families to take full advantage of the credit.

In May, the Senate turned back one effort to enact earned income marriage penalty relief, on a 51-49 vote. The amendment was put forward by James Jeffords (news - web sites), an independent from Vermont.

"It astounds me that while we are giving tax cuts to millionaires, and easing the marriage penalties for those with the highest incomes, we are doing little to nothing for households that are trying to get by on $15,000 a year," Jeffords said.

http://story.news.yahoo.com/news?tmpl=story&ncid=1203&e=1&u=/nm/20030623/bs_nm/economy_t...