NCPA - National Center for Policy Analysis

Women and Taxes

March 5, 2002

Federal tax laws systematically discriminate against two-earner couples, according to a study by the National Center for Policy Analysis (NCPA). This is a widespread problem, since today, 70 percent of married women -- and 60 percent of women with children younger than age six -- are working.

The author of the study, Edward J. McCaffery, a law professor at the University of Southern California and California Institute of Technology, says that more than half of two-earner households suffer a marriage penalty, but that's just the tip of the iceberg.

The marriage penalty is not really a tax on marriage. Instead, it is a tax on two-earner couples. The spouse earning a lower wage -- usually the wife -- is automatically taxed at the higher income earner's tax rate. 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.

The study was released as part of the NCPA's Women in the Economy Conference in Washington, D.C.

Source: Edward J. McCaffery, "Women and Taxes," Women in the Economy Chapter, February 2002, NCPA.

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