WASHINGTON — Tax relief affecting millions of married couples, children and people who stand to inherit wealth is next on the agenda for House Republicans, who are forging ahead with President Bush's $1.6 trillion tax cut plan piece-by-piece.
The House was scheduled Thursday to vote on legislation costing nearly $400 billion over 10 years that would cut taxes for virtually all married couples, including the 25 million who now pay more than they would if they were single. The legislation also would gradually double the $500 child tax credit, including a $100 increase effective in 2001.
Later Thursday, the House Ways and Means Committee planned to approve legislation that would eliminate estate taxes by 2011 while shifting some of the tax burden to heirs who sell assets above a certain value. That bill is headed for a House floor vote next week.
Both measures differ in some details from Bush's proposals but have White House consent. GOP sponsors of the marriage-child credit bill said they hoped to get at least the 51 Democratic votes who supported a similar marriage penalty measure last year, which was vetoed by former President Clinton.
"We all campaigned on the marriage penalty elimination," said freshman Rep. Ed Schrock, R-Va.
Combined with previous passage of a $958 billion plan to reduce and condense income tax rates, the House is on track to push through the biggest parts of Bush's overall tax package by early April. The measures are likely to undergo significant change in a Senate divided between 50 Democrats and 50 Republicans.
Despite growing sentiment for $60 billion in immediate tax cuts to stimulate the economy, House GOP leaders say they've given the president's longer-term tax cuts unstoppable political momentum.
Speaker Dennis Hastert, R-Ill., told reporters before the votes Thursday that the House would not move a separate stimulus measure but would likely attach larger 2001 tax cuts to whatever tax bill emerges during House-Senate negotiations later this spring.
On a mostly party-line vote Wednesday, the House approved a $1.94 trillion budget blueprint for fiscal year 2002 that also endorses Bush's $1.6 trillion in tax cuts over a decade.
Majority Republicans defeated Democratic attempts to shrink the tax cut and boost spending on such priorities as education and debt reduction.
The marriage-child credit tax bill would address an anomaly in the tax code that causes millions of two-income married couples to pay higher taxes than they would if single. It also would cut taxes for millions of other couples, mainly with one main breadwinner, who get a marriage "bonus" from the tax code.
— Widen the bottom 15 percent tax bracket for married couples so that, by 2009, it would be equal to twice the corresponding bracket for singles. For couples who don't itemize, the standard deduction in 2002 would rise to twice the size of the deduction for singles.
—Raise the income threshold for lower-income couples to claim the earned income tax credit and ensure that couples don't effectively lose their tax cuts to the complex alternative minimum tax.
— In addition, the $500 child tax credit would rise to $600, retroactive to 2001, and then gradually to $1,000 in 2006.
The estate tax repeal bill, also similar to a measure vetoed last year by then-President Clinton, would begin cutting tax rates in 2002 and fully repeal the tax in 2011. Bush had sought repeal by 2009.
Only about 2 percent of people who die in a given year actually pay estate taxes, mainly because the first $675,000 in assets per person is exempt — an exemption that will eventually rise to $1 million. But farmers, small businesses and individuals are often saddled with high estate planning and insurance bills, with some forced to sell in order to pay a tax that reaches 55 percent.
Unlike Bush's proposal, after repeal, the House bill would make a change regarding the value or "basis" of inherited assets that would, in effect, recapture some of the potentially lost revenue through capital gains taxes.
Under current law, the value of an inherited asset for an heir is set when an individual dies. If the asset is sold, capital gains taxes are owed on the difference between the price when the individual died and when the heir made the sale.
The House estate tax bill would place the value of an inherited asset back to the time the individual who died acquired it — sometimes many years earlier — meaning that an heir could potentially face a much larger capital gains tax when the asset is subsequently sold. The total of the assets would have to be above $1.3 million to trigger the new rules and above $4.3 million if the heir is a surviving spouse.