Paul L. Caron

Thursday, December 5, 2019

Satterthwaite: Gender Belongs At The Center Of Tax Policy Debates About Inequality

Emily Satterthwaite (Toronto), A Do-Over For The Tax Unit (JOTWELL) (reviewing Margherita Borella (University of Torino), Mariacristina De Nardi (University College London) & Fang Yang (Louisiana State University), Are Marriage-Related Taxes and Social Security Benefits Holding Back Female Labor Supply?):

Jotwell (2020)There has been a surge in empirical literature examining gendered patterns of behavior and outcomes across numerous economic contexts, especially choices within and across families. Relatively little of it has focused explicitly on how the basic structure of our tax laws interacts with and influences such choices. Encouragingly, a recent working paper by Margherita BorellaMariacristina De Nardi, and Fang Yang does exactly that.

Borella, De Nardi, and Yang (BD&Y) study two key policies within the U.S. tax-transfer system: joint income tax filing for married couples and access to Social Security benefits for spouses. The joint income tax filing rule means that a married secondary earner will owe income tax at the marginal rate established by “stacking” her income on her spouse’s income, which generally is a higher rate than would apply if the secondary earner was single. Social Security benefits also increase to account for an earner’s spouse, but do not increase to account for an earner’s unmarried partner.

Both of these policies are gender-neutral on face; however, the background conditions under which they operate are not. ...

These results underscore the centrality of policies that narrow the gap between females’ and males’ labor supply choices, particularly earlier in their careers. For men and women alike, BD&Y’s results echo other studies in finding that accumulated human capital from work experience has a greater influence on wages than other factors like education. (Pp. 25-26.) Robust female participation, particularly during lifecycle years when their children are likely to be small, lays the groundwork for greater wage and income equality later in the lifecycle. BD&Y’s paper provides evidence that joint filing discourages this outcome.

In going to great lengths to estimate rigorously the impact of a core structural element of the U.S. income tax (joint filing), BD&Y have done valuable work. Their findings are not presented as a rallying cry for revisiting longstanding normative questions about gender (in)equality’s role in the design of tax policy. But the larger context invites such a read. At bottom, this paper provides new empirical support for the premise that gender belongs at the center of tax policy debates about inequality.

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Again, this is very nice, but there are numerous articles on precisely these points from the the 1960s, 70s, and 80s. I suppose that, by requiring young people to publish, we pretty much ensure that they reinvent the wheel. But isn't there a better use of people's time?

Posted by: Mike Livingston | Dec 5, 2019 8:24:06 PM

This (joint filing example) strikes me as more of a marriage penalty issue than a gender penalty issue. They portray it as the woman's salary being stacked on the man's to be hit at the higher marginal rates, but it could equally be thought of in the reverse. When laws and regulations are facially neutral to gender, any perceived underlying inequity is based upon societal and individual choices. Any attempt to address those through legal systems is merely creating gender-biased laws.

Posted by: ruralcounsel | Dec 6, 2019 3:38:42 AM

Hard to believe that such a dramatic increase in labor supply would not result in downward pressure on wages. Was any thought given to the consequences (economic and otherwise) of an entire generation of infants and toddlers raised in childcare centers instead of in the home? What of the impact on marriage, divorce, fertility, and abortion rates?

Posted by: Bryan | Dec 9, 2019 9:50:11 AM