Women and Taxes

Policy Reports | Taxes | Work & Wages

No. 250
Thursday, February 28, 2002
by Edward J. McCaffery


  1. This is a principal theme of my book, Edward J. McCaffery, Taxing Women (Chicago: University of Chicago Press, 1997, 1999 (paperback) (hereafter Taxing Women). Chapters Two and Three in particular discuss the historical aspects of the story.
  2. See Sandra Hanson and Theodora Ooms, "The Economic Costs and Rewards of Two-Earner, Two Parent Families," Journal of Marriage and the Family, Vol.53, pp. 622-34 (1991), discussed in Taxing Women at pp. 109, 119. I have periodically updated the figures from this study with contemporary understandings of tax and surveys of consumer finances.
  3. U.S. Census Bureau, Statistical Abstract of the United States: 2000, 120th edition, Washington, D.C. Table 55 sets forth the marital status of the population by sex and age; Table 95 breaks down childless women and children born by race, age and marital status.
  4. Ibid., Table 69. However, recent reports indicate that there has been a shift in the family structure since changes in welfare laws have lowered the financial burdens on being a two-parent household. See Blaine Harden, "2-Parent Families Rise after Change in Welfare Laws," New York Times, August 1, 2001.
  5. U.S. Census Bureau, Statistical Abstract of the United States: 2000, p. 408. Based on data from the U.S. Bureau of Labor Statistics, Table 651 breaks down the labor force participation rates by marital status, sex and age.
  6. The tax tables included in this study are from 2000. The 2001 Bush Tax Package (the Economic Growth and Tax Relief Reconciliation Act of 2001) made many changes in rates and phased in several provisions over time. In addition to some present uncertainty as to whether all of these cuts will go into effect, however, high marginal rates and inequities between married and single taxpayers remain imbedded in the Tax Code.
  7. This example deals only with the federal income tax, but Sally will also pay $76.50 in FICA (Social Security and Medicare) tax and possibly state income tax and local occupational tax, depending on where she lives. This is discussed in detail later in this paper.
  8. See, for example, Elinor Burkett, The Baby Boon: How Family-Friendly America Cheats the Childless (New York: Free Press, 2000).
  9. See Internal Revenue Code (IRC) §1(d) (setting out "married, filing separately" rate structure).
  10. See Andrew Mitrusi and James Poterba, "The Distribution of Payroll and Income Tax Burdens, 1979-1999," National Tax Journal, Vol. 53, pp. 765-94, 2000.
  11. The Federation of Tax Administrators, 2001, http://www.taxadmin.org/fta/rate/ind_inc.html.
  12. See Taxing Women, pp. 19-20, where I make this point at slightly greater length.
  13. Kristin Smith, "Who's Minding the Kids? Child Care Arrangements: Fall 1995," Current Population Reports, P70-70, U.S. Census Bureau, 2000, Washington, D.C.
  14. See Smith v. Commissioner, 40 B.T.A. 1038 (1939), affirmed without opinion, 113 F.2d 114 (2nd Cir. 1940).
  15. IRC § 21.
  16. IRC § 24.
  17. IRC § 21. A tax credit of 30 percent is allowed for certain expenses related to qualifying dependents, but is gradually phased down to 20 percent as yearly taxable income rises above $10,000 to $30,000. 21(a)(2). The maximum creditable amount is $4,800 for households with two or more qualifying dependents. 21(c)(2). Hence Sally and Bill could get 20 percent of $4,800 or $960 back on their taxes. Numerous technical provisions make it difficult for many households to qualify even for this limited amount. See Taxing Women, pp. 115-18 for more detail.
  18. IRC § 129. Such plans would allow employees to take up to $5,000 tax free if the money is used for qualified child-care expenses, a provision that could save families in the 40 percent marginal rate bracket $2,000. Among other technicalities, however, such plans have a "use it or lose it" feature - employees must estimate in advance how much in child-care costs they will incur during a year and sacrifice unused dollars if the estimate is too high. For this among other reasons, Section 21 child-care credits are about 50 times more invoked. See Taxing Women, pp. 118-19.
  19. U.S. Department of Labor, Bureau of Labor Statistics, Consumer Expenditure Survey, 1999, Table 6.
  20. See Edward J. McCaffery, "The Burdens of Benefits," Villanova Law Review, Vol. 44, No. 445, 1999.
  21. IRC. § 32(b)(1)(A).
  22. But see Harden, "2-Parent Families Rise after Change in Welfare Laws," noting a slight trend in the opposite direction.
  23. David Shaviro, "Effective Marginal Tax Rates on Low-Income Households," Employment Policies Institute, February 1999, pp. 7,12.
  24. Harden, "2-Parent Families Rise after Change in Welfare Laws."
  25. Taxing Women, p. 143.
  26. See U. S. Department of Labor, Bureau of Labor Statistics News, "Employer Costs for Employee Compensation Summary," June 29, 2001. http://www.bls.gov/news.release/ecec.nr0.htm. Wages and salaries in private industry averaged $15.18 per hour, with benefits adding an average $5.63; for each $1 in salary, some 37 cents were paid out in benefits.
  27. IRC § 105, 106.
  28. IRC § 401 et seq.
  29. IRC § 221. (Prior law before Tax Reform Act of 1986.)

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