Democratic presidential candidate Al Gore has railed against a proposal by Republican candidate George W. Bush to reduce taxes saying it would benefit only the top one percent of income earners. Writing in the New York Times, however, Virginia Postrel points out that high marginal tax rates at higher income levels encourage married professional women to reduce the number of hours they work, which has strong affects their future promotion potential, or to quit the workforce altogether.
Feminists typically complain that there aren’t enough women at the upper echelons of corporations. While women are more and more represented at mid-level management, they claim, there are not enough women breaking through the “glass ceiling” into executive level positions. As Postrel points out, though, married professional women get screwed by the high marginal taxes if they get promoted too high. Since women are more likely than men to consider not working outside the home, if a woman’s income pushes her family’s income into a higher tax break, there is an economic incentive there not to work.
But does this actually make a difference in the real world? Yes. Postrel cites a 1995 study by University of California at Berkeley economist Nada Eissa on the Tax Reform Act of 1986 which, among other things, reduced the highest tax rate from 50 percent to 28 percent. The result, the percentage of married women in the highest tax bracket who worked outside the home jumped from 46 percent to 55 percent, and those who had jobs increased the number of hours they worked by 13 percent. Looking at women in the 75th percentile, who didn’t receive as dramatic a tax cut, the percentage of married women who worked increased by only 7 percent and the number of hours they worked increased by only 9 percent. As Eissa told Postrel, “There is a relationship between taxes and labor-force participation.”
Eissa found similar results when looking at the effects of the earned income tax credit which provides an economic incentive for poor families not too raise their incomes to high since it applies a de facto 21 percent marginal tax rate on all income above about $12,000 for a family of four. Women in that situation were 5 percent less likely to work outside the home if they were in a position where working would bump their family income above that level.
As Postrel notes, however, this is a topic that neither liberal or conservatives want to raise,
Democrats don’t want to admit that the soak-the-rich taxation wallops working wives, lest they split feminists and redistributionists. And Republicans don’t want to admit that cutting taxes will lead more married women to get jobs, lest they split economic libertarians and social conservatives. So everyone stays mum.
But the empirical evidence is pretty clear. Tax rates are a feminist issue.
Personally I tend to think the liberal feminists are the biggest hypocrites here, as they seem committed to maintaining that a professional woman has the right to decide whether or not to terminate a pregnancy but then is too stupid or too mean spirited to control her own finances, but instead must hand much of it over to the government which presumably knows better than she does. Much of the pro-choice movement has little use for truly giving women (much less men) the ability to make wide ranges of choices over their lives, turning incredibly statist once anything besides the narrow issue of abortion is put on the table.
Tax System Discourages Married Women from Working. Virginia Postrel, The New York Times, November 2, 2000.