Should Married Women be Subject to a Higher Tax Rate?

November 1, 2012

It seems that the underproduction of household goods and services is a significant problem that is so severe  economic researchers have proposed a solution that even they admit is politically incorrect – force married women pay higher income taxes than their husbands. 

I should confess that before today, I didn’t realize that the households have been failing to produce enough household goods and services. Don’t get me wrong, I know that my household is under-producing in the areas of clean laundry and home cooked meals – I am lucky enough to have a thirteen year old son who gives me productivity status updates on a regular basis – I just didn’t realize it was a economy-wide problem.

Now that we know, what can we do?

A solution would be to look at the allocation of time within the household and, recognizing that women still spend a greater share of their time at these activities, find ways to encourage greater participation of men in household production.

One way to do that, would be to tax men at higher rates than women in an effort to encourage them to spend more time at home cooking, cleaning and making certain that the house would pass a random home sanitation inspection, should one occur.

The problem with that approach is that the labour supply of men is not very elastic (they are unlikely to change their work hours in response to changes in their tax rate) and even if they did, let’s face it, they would do a lousy job.

Studies have found that women are, on average, 41% more productive than men at household chores.

The alternative is to tax women who have a more elastic labour supply. You might be wondering, however, how can a higher tax rate for women possibly be the solution when women already earn less than men?

Well, it is exactly that observation (men earn more than women) that justifies the higher tax rate for married women proposed by these researchers.

If a man earns more than his wife, then he has the comparative advantage in waged employment and she has the comparative advantage in working in the home where she is, relatively, more productive. If this couple is optimizing its total output (waged income and home produced goods and services), the woman’s comparative advantage in home production should be sufficient to encourage her to spend more time taking care of jobs that need to be done at home than her husband.

The problem is that that this arrangement only works if her husband is willing to compensate her sufficiently for spending her time making beds when she could be earning an income in the waged workforce. That only happens, however, when husbands and wives are cooperative enough to agree on how much compensation is adequate – and that requires that men care enough that their bed is made to be willing to pay their wife for that service.

The same study I cited above suggests that women value of good and services more than do men – 11% more.

So if there is an under-provision of home produced goods, then it must be the case that either men do not care enough about home production to compensate their wives for doing the work that needs to be done and/or those same men are either incapable or unwilling to do the work themselves.

Where compensation for household production is the proverbial carrot, taxes on waged income is the stick – penalizing married women for every hour they spend in the workforce should encourage women to spend more time at home taking care of their families.

I am going to leave it you to tell me what you think might be the consequences if this tax plan was ever implemented. But when you do, you might consider the following – tax systems that tax both husbands and wives at the marginal tax rate of the highest income earner already penalize women who are earning less than their husbands. That is to say, in some jurisdictions married women already pay higher taxes than unmarried women at the same income level.

References:

Meier, Volker and Rainer, Helmut (October 23, 2012). “Beyond Ramsey: Gender-Based Taxation with Non-Cooperative Couples” Available here.

Both comments and trackbacks are currently closed.

Comments

  • A woman  On 23 November, 2012 at 2:45 am

    Only works if women earn less than men. You’d get a big fat WRONG if you tried to tax women more than me in at least 25% of households.

    And I suspect housework declines in value the longer you spend in paid work regardless of your gender. If you’re home you put more value on stuff like having made beds and dusted bookcases full stop. People who work full time don’t care about that crap, as long as somehwere is liveable.

    (More generally, I think this deserves a big fat WRONG for reinforcing stereotypes and should perhaps be focused on marginal tax rates for PART TIME WORKERS rather than WOMEN, but I’ll give the benefit of the doubt an assume it’s a thought experiment.)