Lawmaker Has Different Way To End Marriage Tax Penalty

Rep. Dan Mader, R-Genesee, is trying a different approach to erasing the “marriage penalty” in state income tax laws.

Tax experts say the marriage penalty kicks in when married couples get less in standard deductions than twice the amount granted to a single filer.

Gov. Phil Batt earlier in the legislative session suggested lowering the amount given to single taxpayers and raising the amount granted married couples, so the married standard deduction would be twice the amount granted a single taxpayer.

Mader won introduction from the state tax committee on Monday of a bill to equalize the deduction simply by giving married couples a larger deduction.

But while Batt’s proposal was revenue neutral - it would not change total state tax collections - Mader’s plan would cost $2.6 million in its first year.

The tax bills affect only people who take the standard deduction on their state income tax returns. People who itemize are not affected.

Batt’s plan calls for reducing the standard deduction for single taxpayers by $504, starting next year. Married couples would get an extra $392.

If a single taxpayer’s standard deduction were cut by $504, it would amount to a tax increase of about $41 at the top tax rate.

There was only brief discussion in the committee as Mader’s measure was introduced, but some members said they wanted an alternative to the Batt proposal.

Mader’s bill proposed increasing the standard deduction for married couples by $300 next year, $500 in 1999, $750 in 2000 and $1,000 in 2001. After that, the married deduction would increase by the amount necessary to equal twice the deduction for single persons.

It would cost the state $2.6 million in fiscal 1999 and $1.7 million the following year.

There was much more debate in the Revenue and Taxation Committee as Rep. Jeff Alltus, R-Hayden, won introduction of his legislation to change the way sales tax revenue is distributed to counties.

If sales tax collections increase, the effect of Alltus’ bill would be to leave more of the revenue in the counties where it is collected.

Rural lawmakers objected to the plan, feeling their small communities would lose.

Alltus said the legislation isn’t intended to take sales tax revenue from anyone, but to give more of the growth to fast-growing areas.

Some lawmakers said they favored Alltus’ proposal because it would give the Legislature a chance to review the formula used to distribute sales tax collections.

Rep. Lenore Barrett, R-Challis, said it would hurt small towns, which are drying up anyway as shoppers go to bigger cities.

“When we have wiped out all the rural communities and everybody moves to Boise, we will have some real problems,” she said.