Tax Policy

NCPA Backgrounder: Marriage Penalty Discourages Working Women (SUMMARY)(TEXT)

A marriage penalty results when a married couple pay more taxes by filing jointly than they would pay if each spouse could file as a single person. The increasing proportion of married women who work subjects more couples to the marriage penalty, says the NCPA's Bruce Bartlett.

  • The number of women in the labor force grew by about 50 percent between the late 1940s and the early 1970s (see figure).

  • The labor force participation rate for women has continued to rise since and in 1997 was almost double the rate of 1947.

Tax policies affecting the marriage penalty have had a significant impact on female labor supply, says Bartlett. For instance, the institution of income splitting in 1948 and the effective reduction in marginal tax rates had a major effect on women's work decisions:

  • Between 1947 and 1950 married women with a husband present -- those most likely to be affected by income splitting -- increased their share of the female labor force from 40.9 percent to 48 percent.

  • By contrast, the labor force participation of single, widowed or divorced women, who gained nothing from income splitting, stayed flat or declined.

The labor force participation rate for men was also unchanged over this period.

After the 1981 tax act, which reduced the marriage penalty by instituting a secondary-earner deduction, married women increased their work by almost enough to pay for the deduction's revenue loss. And an analysis of the Tax Reform Act of 1986 estimated that if the remaining marriage penalties were eliminated, the average married woman would work 46 more hours per year.

Source: Bruce Bartlett (senior fellow), "The Marriage Penalty," Policy Backgrounder No. 145, February 9, 1998, National Center for Policy Analysis, 12770 Coit Rd., Suite 800, Dallas, Texas 75251, (972) 386-6272.

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