'Marriage Penalty' Tax Bill Stalls

House Republicans postponed a vote on legislation to speed up "marriage penalty" tax relief after Democrats tried to attach a separate tax-haven measure some GOP lawmakers oppose.

GOP leaders had intended to use a vote Thursday on the marriage penalty bill as a high-profile way to mark nearly a year since final passage of President Bush's 10-year, $1.35 trillion tax cut. Republicans are still planning a celebratory event, complete with an anniversary cake, but the vote to accelerate the starting date of marriage penalty relief from 2005 to 2003 was put off until next week.

The delay came after Rep. Charles Rangel, D-N.Y., insisted on offering an amendment intended to prevent U.S. companies from relocating to tax havens such as Bermuda.

Rangel's amendment would effectively eliminate any tax benefits for companies that reincorporated in offshore tax havens after Sept. 11, 2001. Companies that had relocated before the date of the terrorist attacks would be returned to the U.S. tax system in two years.

Although these relocations for tax reasons are legal, Democrats have seized upon them as a political issue that is beginning to have some impact on congressional campaigns.

The vote by shareholders of toolmaker The Stanley Works to reincorporate in Bermuda from Connecticut is a key issue in the campaign between Democratic Rep. Jim Maloney and Republican Rep. Nancy Johnson, who are facing each other in a redrawn district.

Rep. Richard Neal, D-Mass., said GOP leaders have "chosen to protect corporate financial traitors" by refusing to allow a vote on Rangel's amendment, which is identical to a bill Neal introduced.

"It is unpatriotic and downright immoral to do this in time of war when we have men and women in harm's way," Rangel said.

John Feehery, spokesman for House Speaker Dennis Hastert, R-Ill., said the Democrats were "drifting off into other issues" at the expense of millions of married couples who stand to benefit from the proposed change. Several features of tax law put married people at a disadvantage compared to two single taxpayers, particularly two-income couples.

"Do they want to oppose marriage penalty relief?" Feehery said.

Several Republicans, including Sen. Charles Grassley of Iowa, have introduced their own legislation aimed at curbing the corporate offshore exodus. Bush's Treasury Department is near completion of a study of whether U.S. companies are being forced offshore because of an uncompetitive tax code.

House Republicans decided to bring the marriage penalty to a floor vote next Tuesday under rules barring any amendments. The bill would begin to increase the standard deduction for married couples so that it equals that of two single people in 2003, two years earlier than under the Bush tax cut. Other marriage penalty relief would still not occur until 2005.

The legislation, a companion to broader GOP welfare legislation that encourages marriage, is estimated to add $861 million to the 10-year cost of the tax cut. While an official estimate has not been completed, legislation less expansive than Neal's bill has been pegged at raising up to $3 billion over a decade.