"Not only does it reduce families' tax burden, it eliminates some of the most egregious examples of unfairness and complexity in the tax code today," said the panel's chairman, Sen. William Roth, R-Del.
The bill, much larger than a 10-year, $182 billion House-passed version, is expected to reach the Senate floor by mid-April. President Clinton has already threatened to veto the House bill because it would consume too much of the projected budget surplus, and Democrats said the same fate would meet the Senate bill.
"It will not be signed into law," said Sen. Daniel Patrick Moynihan, D-N.Y.
The bill, approved on an 11-9 party-line vote by the Finance Committee, included a change sought by GOP conservatives to gradually adjust the 28 percent tax rate so it applies to more of a married couple's income. The bill would do the same thing to the 15 percent bracket.
Under current law, two people who are married pay income taxes at higher rates in both the 15 percent and 28 percent brackets than they would if they were single.
About 25 million couples nationwide are hit by the tax code's marriage penalty, while millions more in which one spouse earns most of the income get a marriage "bonus." Moynihan said more than half of the GOP bill's tax relief would go to these bonus couples, but Republicans countered that all families deserve help.
"It is meaningful relief to a group of Americans who really need it," said Sen. Paul Coverdell, R-Ga.
The bill would also raise the income cutoff by $2,500 for lower-income couples who claim the earned-income tax credit, up from $2,000 in the original bill and the House measure. Sen. Jim Jeffords, R-Vt, suggested this change.
The measure also would gradually raise the standard deduction for married couples to twice that of single filers and permanently ensure that taxpayers who claim middle-class credits, such as the $500 per-child tax credit, do not become ensnared in the alternative minimum tax.
Democrats on the Finance Committee failed to win approval of an alternative by Moynihan that would have eventually allowed couples the choice of filing their income taxes as singles or as a married couple.