House panel approves marriage penalty, child credit tax bill

Thursday, March 22nd 2001, 12:00 am

By: News On 6

WASHINGTON - House Democrats insisted Thursday that President Bush will have to scale back his $1.6 trillion tax plan, even as Republicans continued to expand it, including a $400 billion measure cutting income taxes for married couples and gradually doubling the $500 child tax credit.

The House Ways and Means Committee approved the marriage penalty-child credit bill 26-13 along party lines, with full House consideration planned next week.

Rep. Charles Rangel of New York, senior Democrat on committee, said the bill, combined with the $958 billion across-the-board income tax cut, leaves less than $250 billion for the rest of Bush's plan, which includes elimination of the estate tax, a new charitable deduction and a permanent business research tax credit.

``We would like to know which of the president's recommendation's he would like to drop,'' Rangel said at a Ways and Means Committee meeting to vote on the marriage-child credit bill. ``We only have $250 billion left, since the president has figured this just right.''

Mark Weinberger, the assistant Treasury secretary for tax policy, repeated the Bush administration's mantra that nothing is off the table and that the $1.6 trillion tax cut is the proper size.

``We would like to have all of the proposals in the president's budget,'' Weinberger said.

The marriage-child credit bill represents the second installment of Bush's 10-year, $1.6 trillion tax package, but its components are quite different and it costs more.

``We thought this created a better blended package,'' said Ways and Means Committee Chairman Bill Thomas, R-Calif.

Meanwhile, in the Senate, where lawmakers have not yet begun to write tax legislation, Senate Budget Committee Chairman Pete Domenici, R-N.M., said he would ask his GOP colleagues to rally behind a plan to write an ``early and fast'' tax bill, plus a second one later this year.

The first would cut income tax rates over the next decade, plus provide an immediate rebate to taxpayers this year in an effort to stimulate the economy, Domenici told reporters. The second bill would contain the rest of Bush's proposed tax reductions.

He said the 2001 tax cut would be something less than $93 billion _ the size of this year's projected federal surplus, excluding Social Security and Medicare surpluses.

Like Bush's plan, the House bill would gradually double the child tax credit to $1,000 by 2006 _ but lawmakers want to raise the credit from $500 to $600 effective this year, giving families a quick tax break as the nation's economic outlook darkens.

Bush wants to raise the income limit at which the credit begins to phase out for married couples from $110,000 to $200,000, but the House measure would keep the limits as they are. In addition, Thomas included provisions enabling more lower-income people to claim the credit.

``It greatly enhances the lower end of the income scale,'' Thomas said.

The bill is also quite different from Bush's proposal in lowering the marriage penalty, a feature of the income tax structure that causes 25 million two-earner households to pay higher taxes than do two single people. The House measure would effectively give a tax cut to virtually every married couple.

A marriage penalty illustration: Under current law the 15 percent bracket applies to the first $27,050 of a single person's taxable income, or $54,100 for two single people. A married couple, on the other hand, pays the lowest 15 percent rate on only their first $45,200 of income.

The House GOP proposal would enlarge the bottom 15 percent bracket so that it is equal to twice that of singles, but it would hold down costs by phasing in that change between 2004 and 2009. For those who don't itemize deductions, the bill would raise the current $7,600 standard deduction in 2002 for married people so that it equals that of two singles, which would now be $9,100 combined.

Bush proposed only to provide two-earner couples a 10 percent tax deduction for the first $6,000 of the lower-earning spouse's income, gradually rising to $30,000.

The plan also adjusts the alternative minimum tax so that a married couple who gets the tax cut would not be hit subsequently with a tax increase.