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.