Sunday, June 17, 2007

Sunday dollars+sense: The tax system already discriminates, so let's discriminate in favour of women

It started as something of a joke. A fortnight ago I wrote that women should be taxed less than men.

My thinking was that women are much more responsive to changes in income than men. Really. Think about it. What man do you know who is going to be more likely to take up a job (or more likely to stay in work) if his tax rate is lower?

Despite all the talk about Australia’s “punishing” high rate of personal taxation, I’ve yet to meet a man for whom the tax rate makes much difference when it comes to staying in or getting into work. Having a job is just too important to most men’s identity.

But for women things are much more finely balanced...

Often at home with children, or knowing that they could be at home with children and avoid childcare fees, the after-tax rate of pay matters. Women are much less likely to be in work regardless.

So if we want to design a tax system that will get people to get into work without scaring away people who are already in work, why not tax women less than men.

We do sillier things. We tax money made from capital (capital gains) at half the rate of money made from wages on the more-or-less plausible assumption that capital is footloose and will be frightened away overseas by a high rate of taxation, but that work will not be.

But people rort the system by finding ways to convert income into capital gains.

The only way to rort a gender-based concession would be by a sex change, and changing sex isn’t easy.

It turns out that I am not the only person thinking along these lines. Economics professors Alberto Alesina from Harvard and Andrea Ichino from the University of Bologna have just have put forward the idea seriously in a 30-page academic paper and in a persuasive article in the London Financial Times.

They have even worked out the optimal difference in tax rates, based on the sensitivity of each gender to take-home pay. They say that in Italy the female rate should be 32 per cent less than the male rate; in the US at least 20 per cent less.

If you find the idea unfair, bear in mind that in Australia after decades of equal pay leglislation, most women are still paid less than most men. Think of it as a way of evening things up.

Alberto Alesina and Andrea Ichino, Gender based taxation: A 100 euro bill left on the table? Fleshed out version of FT article, Vox (beta) blog 8 June 2007

Alberto Alesina and Andrea Ichino, Gender Based Taxation, Harvard and Bologna University paper in progress 2007


Mark Riochardson said...


If there is a male identity which keeps men at work as masculine providers, then what is the female identity?

Is it connected to motherhood? Might many women prefer to spend time at home with their children?

Should the goal of society really be to deny a feminine identity and have women at work in the same numbers as men?

Or should it be to encourage that male provider instinct so that women can be supported in a natural way to fulfil their own maternal identity?

backroom girl said...

Peter - As a woman and mother, and full-time worker, I would greatly object to any policy based on treating people differently simply on the basis of gender. For me, it is the antithesis of what feminism is all about.

There was a reasonably long discussion about this issue over at Andrew Leigh's blog, so I won't repeat everything that I said there. Suffice it to say, I think that our progressive tax system already rewards those who work (and earn) lesser amounts, relative to those who do not and it does this without having to resort to gender stereotypes.

The greatest beneficiaries of a tax system that taxed differentially according to gender would be well-paid women, many of whom have no children - a group that a number of people have pointed out probably have labour supply functions not that different to the average man. I can also think of no better way to cement the current predominant division of labour and to ensure that women continue to be paid less than men.

If you think that some women are deterred from working by the costs of child care, why not address that issue directly by either increasing the direct subsidies for child care or making such expenditure tax-deductible.

Dave Bath said...

Apparently Alesina and Ichino, the authors of the paper you mention, are at either ends of the left/right spectrum of economists and many are amazed that they both agree on something, least of all something this controversial!

By the Way: While the blog you cite is in beta, I believe the name of the organization is not "Vox (beta)", but VoxEU (although on their "about" page, they call themselves ""). It's an impressive site, not just for the blog, but the research papers hanging off the side.

backroom girl said...

"Apparently Alesina and Ichino, the authors of the paper you mention, are at either ends of the left/right spectrum"

Perhaps that just means that what's 'good for women' is the one thing that men on the right and left can agree on :-)

Alex Robson said...

You ask "What man do you know who is going to be more likely to take up a job (or more likely to stay in work) if his tax rate is lower?"

Well, myself for a start. And the evidence shows that the elasticity of taxable income with respect to tax rates is quite high, much higher than naive labor supply elasticities.

If the goal is to raise living standards, why not just reduce the tax rates of both sexes?

Peter said...

Why not reduce the tax rate of women by more?

LETTER said...


Taxing thought

I'm amazed that Peter Martin would support something as sexist as Professor Alberto Alesina's man tax (''Women should pay much less tax than men, and I'm not joking,'' June 17, p25). Men already pay more taxes than women, work 90 per cent of overtime, make up about 90 per cent of occupational deaths, drive longer commutes and die younger in the process. They collect Alesina's garbage, climb in his sewers and get exposed to chemicals so he can go to his ivory tower job and propose taxing men more. His man tax is nothing short of outright sexism, hypocrisy, double standards and bigotry.

Marc E. Angelucci, president, Los Angeles chapter, National Coalition of Free Men, Los Angeles, US

Rob Spear said...

Sounds like a great way of getting the women to do the lions share of the work. Given time, maybe we can get to the "Islamic model", where almost all work is done by women, and the men can talk about more important stuff all day.

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