Confession: I’m a total tax geek. News flash: If you care about supporting working women, you should be too, because the tax code is stacked against us. Nothing in the tax code is overtly gendered. However, because women are almost always a household’s secondary earner, and because social norms favor women in domestic roles, the tax code contains practical biases.
First you have to understand what it means to have imputed income. Let’s say you cook yourself dinner, make your bed, or fix your bathroom drain. When you perform these services yourself, rather than hire someone else to do them, you save money. So in a way you’re a little richer and tax geeks call these riches imputed income. As you know, you don’t pay taxes on the money you save by cooking yourself dinner.
And why does this matter for working women? Because unpaid domestic labor—the majority of which is performed by women—produces lots and lots of tax-free imputed income. Researchers at Salary.com calculated market valuations for mothers’ domestic labor: a stay-at-home mother performing the cooking, cleaning, etc. is worth $134,120 because that’s how much it would cost to pay someone else to do those tasks. And mothers who work outside the home contribute at least $85,876 worth of additional labor at home. The government effectively subsidizes this kind of work by not taxing it. This means every woman who works in the paid labor market is giving up the government subsidy enjoyed by her stay-at-home counterpart. The economics of day care, transportation, and domestic work are such that the non-taxation of imputed income makes it more expensive for some women to work and earn a salary than to stay home and take care of a family and house.
The second major gender bias in the tax code is imbedded in payroll and social security taxes. Payroll taxes are only deducted from the first $60k or so of income. So, for example, I have to pay payroll taxes on my income until I’ve made $60k and only after that does the IRS grant relief. Anything I make above $60k won’t be subject to the regressive payroll tax, but everything below $60k is. And why does this matter for working women? Because women tend to earn less than men, a greater portion of women’s salaries are being withheld in payroll taxes. In addition, because Social Security and Medicare benefits extend to spouses, working wives pay payroll taxes for a benefit they would receive for free via their husbands. Once again, going to work means giving up the subsidy your stay-at-home counterpart enjoys.
Joint filing also disadvantages working wives, but more subtly. Joint filing was introduced into the tax code sixty years ago, when only a minority of married women worked full-time. Like the non-taxation of imputed income, joint filing provides traditional families with a tax bonus. Instead of taxing each earner at their individual rate, joint filing combines household income and then taxes each half as if it were being earned separately. So if I’m currently earning $100k, and I marry someone who’s not making a dime, we pay our taxes like we’re too people both earning $50k. That means we pay less in taxes, because we’re paying our taxes in lower tax brackets. Why does this matter? Because women are generally a household’s secondary earner. Accounting conventions tend to stack a wife’s income on top of her husband’s base income when calculating income tax. So if I’m making $100k and I marry someone who’s making $100k, we tend to think of my husband’s income as being split first, filling up those lower tax brackets. Then we think of my income as being stacked on top of his income in the higher tax brackets. So when we do the math, even though I’m earning the same amount as my husband it seems like I’m paying more taxes.
All this is to say: As April 15th approaches, get mad. Because if you were a guy or a stay-at-home gal, you’d be better off tax-wise.