Committee Opts To Give Married Taxpayers A Break

The legislators who help decide state tax policy decided Wednesday to take the more popular course of granting a state income tax cut to married taxpayers rather than raise taxes on single people.

Still, the bill faces an uncertain future in a legislative session fighting for every dollar to put into the state budget. If passed and signed into law, the measure would drain an estimated $12 million from the state treasury over five years.

The Revenue and Taxation Committee sent to the full House legislation sponsored by Rep. Dan Mader, R-Genesee. It eliminates the so-called “marriage penalty” by raising the standard deduction for married couples on state income tax returns by $1,400 over five years. The bill will be put up for amendment to clarify its effective date before it is considered by the full House.

If the measure becomes law, in fiscal year 2004 a married couple would get a $114.80 cut in their state income tax at top rates.

Competing legislation from Gov. Phil Batt was killed by the committee. Batt’s bill would have given married couples a small tax cut, but at the expense of higher taxes for single taxpayers.

The “marriage penalty” comes into play when married couples file jointly because they receive less than twice the standard deduction granted single taxpayers. In Idaho, the difference this year is $1,400.

But the state’s tight financial picture makes abolition of the “marriage penalty” unlikely, said Michael Ferguson, chief state economist.

Batt’s bill would have given a married couple a $32 tax break in the top income bracket by raising the standard deduction by $393, but at the expense of a $504 cut in the deduction for single taxpayers, a tax increase of $41 at top rates.

State tax officials said that in tax year 1994, 153,253 out of 226,858 joint returns would have benefited and 149,558 single taxpayers would have faced higher taxes out of 167,779 returns filed.

The changes would affect only people who take the standard deduction and do not itemize.

Rep. Frank Bruneel, R-Lewiston, who carried the bill for Mader in committee, said the actual tax impact would be much less, since people who benefited from the tax cut would have more money to spend.

The committee also gave preliminary approval to legislation that would have the effect of cutting sales tax collections by up to $50,000 a year.

Larry Benton, lobbyist for the Idaho State Broadcasters Association, got the tax committee to approve introduction of a bill making it clear that media measurement services are services, not a product, and therefore are exempt from sales tax.

For many years, radio, television and newspaper measuring systems, such as Nielson ratings, Arbitron ratings and related activities, have not been subject to sales tax.

Benton said the Tax Commission is attempting to change that practice. The amount of potential tax isn’t large - up to $50,000.