U.S. Tax Laws Systematically Penalize Wives Who Work

NCPA Study Suggests Some Wives May Actually Lose Money

WASHINGTON, D.C. (February 28, 2002) -- Federal tax laws systematically discriminate against two-earner couples. According to a study to be released Monday by the National Center for Policy Analysis (NCPA), more than half of two-earner households suffer a marriage penalty, but that's just the tip of the iceberg.

"The tax law discriminates against working wives from top to bottom." said Edward J. McCaffery, professor of Law at the University of Southern California and California Institute of Technology and author of the NCPA study. "That's because it was mainly written at a time when most women did not work. Today, 70 percent of all married women and 60 percent of mothers with children younger than six years old are in the labor market."

The marriage penalty is not really a tax on marriage. Instead, it is a tax on two-earner couples. When a wife enters the labor market, she is automatically taxed in her husband's income tax bracket even if she's earning only the minimum wage. The study says that when taxes are combined with the extra expenses of leaving home, the average married woman gets to keep only about one-third of what she earns. In addition:

  • Social Security is great for women who don't work because they receive benefits on their husband's contributions; however, women entering the labor market get very little in return for the Social Security taxes they pay.
  • In general, employers cannot offer a choice between wages and benefits, and this take-it-or-leave-it approach penalizes women who already have health insurance and other benefits through their husband's employer.
  • Parents today get very limited tax relief for the costs of paid child-care, which offsets only a fraction of the real expenses.

This study will be released as part of the NCPA's Women in the Economy Conference, held March 4 in the Holeman Lounge at the National Press Club in Washington, D.C. Labor Secretary Elaine Chao, Sen. Kay Bailey Hutchison (R-Texas) and Rep. Barbara Cubin (R-Wyo.) are featured speakers, and other groundbreaking NCPA studies highlighting the effects on women of the health care system, Social Security, welfare and retirement will be presented.