NCPA - National Center for Policy Analysis

High Taxes Discourage Married Women From Working

November 2, 2000

"Marriage penalty" aspects of the tax code have received a fair share of political attention recently. But the code contains another distortion which rarely elicits comment: the high marginal tax rates imposed on the pay of working married women. Some critics say it should be a paramount feminist issue.

Economist Nada Eissa, at the University of California at Berkeley, has studied how married women responded to the Tax Reform Act of 1986 -- which chopped the top marginal tax rate to 28 percent from 50 percent, but had only a minor impact on middle-income taxpayers.

That situation gave her an opportunity to compare the responses of different groups of wives before and after the change.

  • Before the change, women in the 99th percentile of family income paid on average about 52 cents in taxes on the first dollar they earned.
  • The 1986 law slashed the average marginal rate paid by such wives to 38 percent.
  • As a result, the proportion of married women who worked jumped from 46 percent to 55 percent, while those who already had jobs increased their hours 13 percent.
  • Labor force participation and hours worked also rose among women in the 75th family-income percentile -- but since they got a much smaller tax cut, the increases were significantly less.

Eissa sees a "fairly strong" relationship between taxes and labor force participation. By disproportionately punishing married women's work, the tax system distorts their personal choices.

Source: Virginia Postrel (Reason magazine), "Economic Scene: The U.S. Tax System Is Discouraging Married Women From Working," New York Times, November 2, 2000.


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