This article was co-authored by Maria Andersen
Americans just sent the last bit of 2010 tax paperwork – along with a sizable chunk of our incomes – to Uncle Sam. Most Americans naturally want to put the ordeal behind us. But before the memory fades, it's worth reviewing the toll that our Leviathan tax code takes on our economy, and specifically on American women. Washington may be filled with rhetoric about helping women in the workplace, but policymakers could really provide women with a needed boost by lowering tax rates and creating a simplified, family-friendly tax code.
It should come as no surprise that women shoulder a big share of the total tax burden. The number of women in the workforce has grown by 44.2 percent over the last 25 years. In 1984, women’s participation in the labor force was 53 percent. Today nearly six in ten women work, and women account for nearly half (49.8) of all workers.
Women's earnings play an increasingly important role in making their families’ ends meet. In 1983, wives’ incomes comprised just 28.8 percent of total family income. By 2008, that number had increased to 36 percent. In the past, married couples have been subjected to higher tax rates than singles with similar incomes. This so-called “marriage penalty” was eliminated for some tax brackets with the Bush tax cuts of 2001 and 2003. In 2010, legislators wisely voted to extend these cuts.
But many married women who file jointly with their husbands still face a higher marginal tax rate than their single peers. For higher income couples, the secondary earner (typically the wife) can lose more than half of her income to taxes, leading many to question whether the net gain to the family is worth the woman’s work.
Discouraging women from working has big consequences. Women who have been out of the workforce have more difficulty finding a good job, leaving them more vulnerable to hardship in the event of divorce or the death of a spouse.
These policies also have big consequences for the economy. Women are an increasingly educated segment of the workforce. In fact, they earn six in ten bachelor's degrees and more than half of master's degrees. They make important contributions, helping companies grow and create jobs. Driving women out of the workforce means that we lose some highly skilled workers who are contributing to the growth of our national economy.
Importantly, women aren't just workers – they’re often business owners as well. The number of women-owned businesses increased 50 percent from 1997 to 2011 – far exceeding the national average. Research shows that women are more likely to own very small businesses (an average of 1.05 employees per firm). Women and small business owners suffer the most from the government’s overbearing tax codes.
What’s more troubling is that the current administration, led by President Obama, would suggest raising taxes now. Under the politically palatable guise of “soaking the rich,” Obama’s proposals would actually target small business owners who file the profits of their businesses on their personal income tax returns. It’s no wonder that the flexibility of owning a business appeals to many women who seek to balance family and career. But it should surprise us that our leaders in Washington want to punish successful, innovative women – and men – who strike out on their own. Raising tax rates will further drain the private sector of valuable resources and discourage male and female entrepreneurs alike.
There is no reason that our tax code has to be as complex and burdensome as it is now. Instead of feeding Washington’s hungry spending disease, we should move toward a flatter income tax system. This would benefit married women, because if rates were more similar across the brackets, the marriage penalty for similarly-earning couples would be reduced. And it would benefit us all – regardless of gender or marital status– because hard work and upward economic mobility would be encouraged rather than punished. It’s time for Uncle Sam to stop talking about helping women, and start taking action by applying common sense reforms to our tax code.