Paul L. Caron

Friday, March 5, 2010

Ryznar: The Tax Disincentives for Married Women

Margaret Ryznar (Law Clerk to Myron H. Bright, U.S. Court of Appeals for the Eighth Circuit) has published To Work, or Not to Work? The Immortal Tax Disincentives for Married Women, 13 Lewis & Clark L. Rev. 921 (2009).  Here is the abstract:

Among the most fundamental barriers to the aggressive participation of many married women in the work force are the disincentives for secondary income earners embedded in the federal tax code. Specifically, the current code contains a marriage penalty, which is aggravated by the progressive nature of taxation and any potential increases in income taxation. Meanwhile, child care expenses, a prerequisite for entry to the labor market, are treated inadequately. Although these immortal problems persist despite political pushes for relief, new attention to this topic is warranted given the Obama Administration’s pledge for tax law reform. If the principle to be prioritized is that married women should not face tax disincentives to pursue paid work, then the tax code must finally deal with these issues effectively.

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As the paper points out, about 75% of secondary earners are women according to labor statistics—that is presumably why the paper considers the issue mainly in regard to women. More importantly, however, many secondary earners simply cannot afford to stay at home—I don’t think tax law should penalize their pay. For those who can afford foregoing work, it is misleading to say that, in every case, their decision to stay at home full-time with kids (especially after the kids enroll in school) vastly improves their kids’ welfare. Not only are there many part-time or child-friendly jobs, but kids may benefit from seeing both parents sharing domestic responsibilities in addition to engaging in activities outside the home.

Posted by: Another female perspective | Mar 9, 2010 3:23:25 PM

I have to agree that with the first poster that I find the whole framework extremely offensive. (And I'm a woman!!)

A 2nd wage earner in a family is not as much of an advantage (or really as "required"), as generally is assumed. We've been on 1 main income plus a little here and there for the last decade. It can be done.

Once childcare is factored in, there is very much a diminishing return to 2 adults at work. Ironically, most 2 income families I know are in much worse shape than us financially because they have failed to consider in advance the impact of the expenses (including taxes) that is part of earning that second income.

Kids to do better when a loving, caring unstressed caregiver is around. The presumption that we all should be 2 income families (and that should be one of the goals of the tax code) is pretty child unfriendly at best.

Also, as a woman, I seriously dislike the presumption that I would work full-time if had more economic (read:government) support or that somehow I'm being held back by not doing so. My worth as human being is not dependent on my profession or lack therof, nor is my husband's.

Posted by: AM | Mar 5, 2010 4:07:11 PM

Several factors create an economic marginal cost rate of the earnings of the second spouse upwards of 50%-80%. As the article states, the second spouse's earnings are taxed at the higher marginal rate, not the average marginal rate; the fica and medicare tax remains applicable, most if not all, the credits are phased out once over the $100k range. There is also the additional cost of employment, cost of child care and the loss of earnings of the first spouse due to need to share the child care burden.

Posted by: Joe | Mar 5, 2010 6:09:06 AM

I find the whole concept behind this article extremely offensive because it presumes that women are the second income and that men won't be primary care givers.

Also, it doesn't make any sense to give people deductions for childcare expenses. If anything, we should be incentivizing at least one parent to stay home to raise the child. There is plenty of evidence suggesting that children with stay-at-home parents do better in school, etc.

Posted by: asdfsa | Mar 5, 2010 4:55:26 AM