Legislature(2001 - 2002)
02/06/2001 03:30 PM Senate STA
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
SJR 12-ELIMINATE MARRIAGE TAX PENALTY
SENATOR LEMAN delivered the following sponsor's statement.
SJR 2 expresses the Legislature's support for reducing the
imbalance in the federal Tax Code that taxes married couples
disproportionately more than unmarried couples earning the same
level of income.
The marriage penalty impacts millions of married couples. According
to the Congressional Budget Office (CBO), under current tax laws
married couples pay an average of $1,480 more in taxes each year
than two unmarried people. Between 66 and 68,000 Alaskans are
affected.
The two primary penalties are the standard deduction and the
graduated rate structure. First, the standard deduction amount for
joint filers is not twice that for those claiming single status.
This means an unmarried couple can deduct more of their income than
a married couple. Second, income rate structures that push
taxpayers into higher brackets are less than twice for joint filers
than for those claiming single status. This means that a married
couple may be forced into a higher tax bracket than an unmarried
couple earning the same combined income.
Congress attempted to deal with the marriage penalty last year when
it passed the "Marriage Tax Relief Reconciliation Act of 2000."
This would have provided tax relief to married couples penalized
under current tax laws, but President Clinton vetoed the measure.
Because President Bush and his Cabinet have expressed strong
support for reducing taxes, Congress should revisit the marriage
penalty.
SENATOR LEMAN said that Mr. Bob Sremak, CPA, was online to answer
any specific questions about the standard and graduated deductions.
CHAIRMAN THERRIAULT asked Mr. Sremak if he had any testimony.
MR. BOB SREMAK said that he had some general comments. He said that
this was a complex issue that is not income specific; both upper
and lower income couples are affected. Any provisions that are
sensitive to earned income or adjusted gross income may be
impacted. An example is earned income credits where the more earned
income credits on a return, the lower the possibility the filer
will qualify for the earned income credit. Other areas such as
phase out for individual retirement accounts, child tax credits and
interest deduction for interest on college education are affected.
It's an inequitable area that must be dealt with.
MR. SREMAK said that anyone with children under age 14 and
receiving a permanent fund check could have part of that taxed at
the parent's rate. As a married couple, roughly $43,000 of taxable
income is the limit for staying in the 15 percent tax bracket.
After that, you move into the 28 percent bracket. It's possible for
children under 14 years old to be in the 28 or 31 percent bracket
for the permanent fund dividend. It's tagged onto what the parents'
incremental rate becomes.
CHAIRMAN THERRIAULT asked if the tax was applied to the entirety of
the permanent fund check because it was unearned income.
MR. SREMAK said no, it's phased in. Basically, any income over
$1,400 would be taxed at the parents' highest rate. Generally, the
first $700 of unearned income for someone under 14 years old isn't
taxed, the next $700 is at 15 percent, and then anything over
$1,400 is taxed at the highest of either the child's or parents
rate.
CHAIRMAN THERRIAULT asked for questions. There were none. He then
asked for a motion.
SENATOR PHILLIPS made a motion to move SJR 12, as written, to the
next committee of referral.
CHAIRMAN THERRIAULT noted that there was a zero fiscal note
attached.
He asked for any opposition. There being none, the bill and fiscal
note were forwarded to the next committee.
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