|MONEY | spring 2007
Now that you’ve paid your taxes, it’s time to start righting the system’s wrongs
What comes to mind when we think of income taxes? Probably dread. Do we ever think women’s issue? Not likely—but we should. Taxes are something women and men face with unequal pain, let alone gain.
Even though the first purpose of the tax system is to raise revenue for government functions, historically it has also been used to shape the behavior of taxpayers. An easy example is the encouragement of home ownership by allowing mortgage interest deductions on federal income taxes. And anyone who has been paying attention knows that the tax cuts passed under the Bush administration favor the rich and corporations. Men as a group are wealthier than women, and hold virtually all of the power in corporate America, so the cuts have disproportionately favored them.
But few of us realize that the tax code has always favored men over women, especially those with stay-at home wives. A married couple faces a “marriage penalty” if their two incomes are similar and they file a joint return, since their combined incomes can throw them into a higher tax bracket. Thus the second income (usually the wife’s) is taxed at a significantly higher rate than if she filed as an individual. (Congress temporarily remedied that situation, but the fix expired.) If a couple forgoes a second income (usually the woman’s), or if one person's income is appreciably lower, they may benefit from a marriage bonus, paying less than they would have as single filers. Both situations can reduce the incentive for a married woman to work outside the home: She either gets talked out of it, or punished with a higher tax rate if she takes a job.
The situation is exacerbated by “family accounting,” in which a couple assesses all the expenses related to a second job against the paycheck of the lower earner. The reasoning goes something like this: “By the time she pays for extra taxes, child care, dry cleaning, wear and tear on the car, meals out, etc., the amount of money left over is not worth the trouble. It makes more sense for her to stay home.” But what about the husband’s share of child care, dry cleaning and car expenses? Shouldn’t the family count those against his paycheck?
While business interests and churches have long had armies of lobbyists to influence tax policy, feminist influence has been minimal. But that may be changing. Published recently by the Feminist Press, Taxes Are a Woman’s Issue, by Mimi Abramovitz and Sandra Morgen with the National Council for Research on Women, calls on feminists to get more involved: “In a fair system, women would not lose out, [and] taxes would be based on ability to pay.”
Here are some places they and other experts recommend for action:
- Get marital status out of the tax code. The basic tax-paying unit in the U.S. system is defined as a married heterosexual couple or single individual. We should redefine the tax unit to follow the model used in almost all other industrialized nations: Each taxpayer is treated as an individual regardless of household type. This would eliminate both the marriage penalty and the marriage bonus, and at the same time would no longer exclude gay or cohabiting couples.
- Increase the Child Tax Credit and apply it to all families with a payroll tax liability. Working poor women get very little help from the Child Tax Credit because it is tied to the amount they pay in income tax, which is low because their incomes are low. Yet many still have significant payroll tax bills for such things as Social Security and Medicare. In fact, more than 95 percent of Americans in the bottom 20 percent of the population pay more in payroll tax than in federal income tax—so applying the tax cred it to payroll taxes as well as income taxes would benefit working poor women.
- Institute paid family leave, funded by unemployment taxes, with incentives for men to take leaves as well. California instituted paid family leave in 2004, funded by state taxes. We should not only have a national system of paid leave, but go a step further and emulate Sweden’s system. There, in order to get the full benefit, each parent must take a turn at caregiving; the benefit doubles if the father takes his turn. This wouldn’t help single mothers, but for married couples it would go a long way toward getting men to do their fair share, leveling the playing field at home and at work.
- Remove the caps on Social Security taxes and give a Social Security credit for caregiving. Abramovitz and Morgen oppose privatizing Social Security— the primary source of retirement income for women—because it would undermine economic security in old age. But we also need more money in the system. Currently, earnings above $97,500 are not subject to Social Security taxes, meaning that the highest income earners (mostly men) once again escape paying their fair share. And while income-tax policies encourage women to stay home and take care of kids, Social Security then punishes them by entering zero for each year outside the paid workforce. That means a more meager retirement. Credit could be given for a longer period if both spouses take such time off, again encouraging men to take their share of responsibility for kids.
- Revoke favorable tax treatments for institutions that discriminate against women. Courts long ago ruled that religious schools that bar blacks are not entitled to tax exemptions. Yet churches, many of which openly discriminate against women, enjoy billions of dollars in tax savings through exemptions from income and property taxes, not to mention benefiting from the largesse of contributors who deduct their contributions. In turn, these funds are used to undermine women’s rights. Case in point: Catholic and Protestant churches were among the biggest contributors to anti-abortion referenda in the 2006 election.
Another way tax rules underwrite sex discrimination is allowing deductions for business expenses at places barring women. After a national controversy four years ago over the exclusion of women at Augusta National Golf Club, where corporations spend millions entertaining clients at taxpayers’ expense, Carolyn Maloney (D-N.Y.) introduced a bill in Congress to disallow such corporate write-offs. The bill, still pending, doesn’t say “private” clubs can’t keep women out, or that corporations can’t entertain at such places; it just says that they can’t ask taxpayers to foot the bill.
If some of the changes we need seem far-fetched or impossible, remember this: There was a time when the income tax was highly controver sial, and now it is universally accepted. “Feminists need to devote time, effort and political skill to working out model tax programs to improve gender equity and gain widespread support of women and their representatives,” says Heidi Hartmann, president of the Institute for Women’s Policy Research in Washington, D.C. She’s right. We’re a long way from a feminist tax policy, but we have to take the first steps be fore we can get there.
Martha Burk is the Money editor for Ms., and Director of the Corporate Accountability Project for the National Council of Women's Organizations.