Taxes are a Woman’s Issue:
Reframing the Debate
Executive Summary

Tax policy affects everyone. It pervades every aspect of our nation’s life – from the roads we drive on, to national security and public safety, to the schools that teach the next generation. How we levy taxes and distribute the nation’s resources is fundamental in creating a healthy, vibrant economy that benefits everyone.

But taxes ARE also a woman’s issue. Current US tax policies have a far-reaching and largely negative impact on women – and recent changes in our tax system are challenging our nation’s commitment to fairness, equity and justice along with our economic well-being.

Taxes Are A Woman’s Issue: Reframing The Debate

In a new book, the National Council for Research on Women and authors Mimi Abramovitz and Sandra Morgen shine a light on the ways women are affected by tax policies and reframe the issues of taxation and public spending for all of us. The book includes “Tax Talk 101,” a primer with basic terms and concepts; a description of the ways women, in all their diversity, can be affected by taxes; a quick overview of the history of US tax policy; an analysis of the dual “welfare” system by which tax revenues are used to support our basic needs; and an analysis of how the tax system, especially recent changes to that system, are disadvantaging women and their families. With talking points at the end of each chapter, portraits of individual women tax payers threaded throughout the volume, and a forum of experts discussing their perspectives on women and taxes, the book is accessible to those with little background in tax policy. It is meant to give the general reader a basic understanding of taxation but also to reframe this complex issue for policymakers and advocates, providing new understandings and approaches for their work.

In analyzing the impact of taxation on women, the National Council for Research on Women and the authors of this volume make a call for tax policies that address the unique needs of women regardless of race, ethnicity or class, and at the same time, serve US families, communities, and the nation as a whole.

What Experiences Of Women Need To Be Figured Into Sound Tax Policy?

The many differences among women –different races and ages, family structures and cultural backgrounds, immigration and economic statuses – mean that tax and spending policies do not affect them uniformly or to the same degree. But women, despite their differences, have common experiences and share certain positions in our economy. They all tend to shoulder similar responsibilities at home and in their communities, and they face common issues in the workplace. When it comes to tax policy, these unique needs and shared circumstances have been largely ignored.

• Women tend to earn less on average than men and are poorer. For example, recent data about earnings that examines race and gender together show that in 2003, women working full time earned just 76% of what men earned. For women of color, the picture is even more stark: African American women in 2003 earned only about 80% of White women’s earnings. With less income to draw on for basic needs, women benefit from a progressive tax system that taxes people according to their ability to pay, unlike a flat or regressive tax system .
• Women's income is more likely to come disproportionately from wages rather than from dividends or other income from wealth, so they are unfairly penalized when wages are taxes more heavily than income from wealth.
• Women are more likely than men to work part time, interrupt their work lives, and spend fewer years in the paid labor force. These work patterns, combined with lower salaries, mean that women earn 62% less on average than men over the course of fifteen years in the prime of their work lives. Women also have less access to employer-provided benefits and a greater need for tax-supported services like income security programs and health insurance.
• Women tend to be more responsible for caregiving and comprise 82 percent of single parents. They therefore depend more on adequately funded public services for public health, child care, income support, and education to sustain their families.
• Women tend to live longer than men, and because they work in the paid economy for fewer years at lower wages, their private retirement pensions are on average half those of men. Therefore, they need good publicly funded retirement benefits, including health coverage.
• Finally, women are now almost half of all wage earners, but many tax policies were enacted before they entered the workforce in great numbers – and their changing roles in the paid economy are not well reflected in the current system.

In the final analysis, women generally benefit from a progressive tax system that taxes people according to their ability to pay. They are disadvantaged by a tax system that doesn’t raise enough money for public services that support and help compensate for their patterns of paid and unpaid labor. Yet, over the past quarter century, and especially since 2001, tax policy changes have greatly undermined the progressivity of the tax system and underfunded much needed public services.

How Has This happened?

Significant changes in tax policy over the past quarter century have led to increasingly inadequate budgets at the local, state, and national levels and a decreasingly progressive tax system overall.

Progressive taxes, like income and corporate taxes, have always provided a significant percentage of public revenues. But with the rise of “trickle down” economics in the 1980s and neoliberal policies in the 1990s, the percentage of federal revenues from corporate taxes has decreased from about half of all revenues in 1946 to less than 15% in 2002. And while the income tax has remained a fairly steady percentage of the federal budget at about 40 percent, the dramatic decrease in tax rates for those at the top of the scale in the last 30 years has made it significantly less progressive than it was for the post-World War II generation.

At the same time, taxes on wealth, the most progressive kinds of taxes, have been systematically rolled back. Capital gains taxes, which apply to profits made on the sale of financial assets like real estate or stocks, account for more than half of the income of the very wealthy, yet tax rates on that income have been more than halved since the 1970s. Likewise, the inheritance tax on large estates and taxes on dividend income from corporate stocks and bonds, both of which affect to a very large degree the very wealthy, have been slashed.

Add to this the great growth in more regressive taxes – like state sales taxes and payroll taxes – and you have a system that is taking less and less from those with more – and more and more from those with less.

Tax cuts since 2001 have accelerated this trend, lowering the combined federal, state and local tax rate for the top 1% of taxpayers by 12 % while low-income taxpayers enjoyed cuts of only 3 %. In 2005, federal tax cuts enacted since 2001 will give those in the top one percent of taxpayers a break 47 times greater than the tax cut for the middle fifth of taxpayers.

Another factor in this trajectory has been the increase in tax expenditures (deductions, credits, and exemptions). It is estimated that the 5 largest expenditures will reduce the total federal tax revenue by $2.1 trillion for fiscal years 2005 – 2009, tax breaks disproportionately enjoyed by corporations and those with the highest incomes. These tax expenditures are called “fiscal welfare” since they often provide financial support for basic human services like home ownership (the mortgage interest deduction), caretaking (the deduction for dependents), and retirement (401Ks and other tax exempt savings). Some of these expenditures, like the Earned Income Tax Credit, provide much needed support for families at the low end of the income scale. Others like the deduction for interest payments on home mortgages have helped encourage home ownership among the middle class. But in general, tax expenditures tend to be more available and have more value to those with the highest incomes because they are the ones with enough after-tax income to take significant advantage of those tax-exempt retirement and health savings accounts, or take out large mortgages on second homes, or pay for specialized accountants to help find other tax shelters.

What Are The Results Of This Trajectory?

For some women, these policies merely compound inequities already built into our economy. For women with low incomes, they pose devastating threats to their fundamental security and that of their families. This inequality is built into the ways the nation raises and spends its tax revenues. It is both systemic and structural, affecting all women but not in the same ways or to the same degree.

• Less Public Money: Together, the decreasing progressivity of the tax system and the increase in tax expenditures has meant that governments have a smaller pool of the national wealth available to fund our public services. Lower tax rates on high incomes and wealth, decreases in corporate taxes, and the increase in tax expenditures, especially for those with the highest income, mean that governments are limited in how much of the Gross National Product they can draw on for needed public programs. The result: in 2004, tax revenues dropped to an estimated 15.8% of the GDP, the lowest level since 1950 when Medicare and Medicaid, the Departments of Education and Housing and Urban Development, even the interstate highway system, did not exist.

• More Pressure on Low- and Middle- Income Earners: With changes in the tax system at all levels of government, the share of the national tax bill paid by low and middle income wage earners, disproportionately women, is increasing while the wealthy and corporations are seeing more of their incomes remain in their pockets after taxes.

• Underfunded Public Services: With decreased tax revenues relative to GDP and increased spending for the military and debt service on our national debt, there is less money to sustain the quality and availability of public services that affect us all – like public education, roads, sanitation, environmental protection, and public safety.

• Squeeze on Social Welfare : The decrease in public funding has had a devastating impact on social welfare, that is, the direct public funding of services. Need-based public programs like Medicaid, nutrition programs, and childcare on which low-income women particularly depend have been consistently squeezed. Even publicly funded social insurance programs like Social Security and Medicare, which are almost universal in their coverage and much less stigmatized than need-based programs, are under attack. In February 2006, Congress and the President cut an additional $39.5 billion over 5 years from such programs as health care for the elderly, student loans, and prescription coverage for the poor – with more cuts proposed in the President’s 2007 budget proposal.

• A Widening Gap between Rich and Poor: Our decreasingly progressive tax system no longer serves very well as a corrective to an economy that is putting more and more of the nation’s resources in the hands of the very richest among us. While the after-tax income of the top one percent of earners increased by almost $400,000 (or 129 percent) between 1979 and 2003, those in the middle fifth of income earners enjoyed an increase of just 15 percent, or $5,900. The incomes of poorest fifth of earners increased a mere $600, or 4 percent, during the same time period. The end result is that more of the nation’s wealth is in the hands of those at the top of the scale. In 2001, the richest 20% of households owned 83% of the country’s assets while the bottom 18% had zero or negative net worths – and this discrepancy is even more dramatic when race is considered. Nearly 31% of African American households had zero or minus net worth.

• Decreasing Security for Some: The stark lessons of Katrina and its aftermath brought home to the whole nation the devastating effects of chronically underfunded social services on the more vulnerable of our population, and even on those in the middle classes. As public services like basic housing, nutrition, health care, and education programs shrink, low and even some moderate income earners, especially elderly women, women of color, and single mothers, face long-term impoverishment.

• Decrease in Global Competitiveness of US : With cuts in education, worker safety programs, research, and other public investments, the US economy and educational system are facing increasing challenges in the global marketplace.

• Increasing Strains on our Democracy: Current policies, by squeezing low and middle income earners with an increasing share of the nation’s tax bill and decreasing public services, are creating a society that is disaffected, insecure, and not reflective of our proclaimed belief in equal opportunity.

What Are We Calling For?

The National Council for Research on Women is calling for a fair tax system, a system where women will not lose out, racial disparities will be addressed, taxes will be based on ability to pay, low and moderate income taxpayers will have enough after-tax income to care for their families, and we all will share the responsibility for creating a safe, just, educated, and economically sound nation.

Here are some actions we can take to make our tax system better for the whole nation, including women:

• Make the overall tax system more progressive by: rolling back recent tax cuts on wealth and high incomes; preserving the estate tax for high wealth individuals; reforming the Alternative Minimum Tax so that it affects only those high earners it was meant to impact; raising or eliminating the cap on earnings subject to the Social Security tax; reforming tax systems at state and local levels so they rely less on regressive taxes like sales taxes.

• Ensure that the fiscal welfare system (tax expenditures) serves all taxpayers. Strengthen and extend tax credits like the Earned Income Tax Credit and the Child Tax Credit that support families who need that support the most; be sure they are fairly implemented by the IRS; and close the loopholes that allow large corporations and high income earners to avoid paying their fair share of the cost of public services.

• Bolster the Social welfare system to ensure that it provides a meaningful safety net for the poor, the unemployed, children, the elderly, those who are ill, and others who are most vulnerable. Protect programs that are based on need, like Medicaid, public financing for housing, educational loans, and income support, as well as more universal programs that help individuals and families whatever their economic status, such as Social Security, Medicare, and Unemployment Insurance. Ensure that the funding for these programs is raised through progressive taxes. Avoid privatizing services, which often means the end of access to services for the most disadvantaged, and greater insecurity for the rest of us.

• Challenge budget proposals that cut funding for education, health care, human services, public safety, and other critical tax-supported programs and infrastructures. Sustaining these programs is essential if we want to support women’s care work in the home and ensure an inclusive, adequate, productive, and globally competitive society.

• Ensure that businesses pay their fair share of taxes. Create positive incentives for businesses to provide health and other vital employer-provided benefits, and to contribute to environmental protection and worker safety. Repeal tax code provisions that reward them for outsourcing jobs and sheltering money on which they should pay their fair share of taxes.

• Collect and make available data about taxes that are disaggregated by gender, race and class so that we can understand and address how different groups gain or lose from particular tax policies.

• Ensure greater transparency of the tax code to make it easier to negotiate and clear in terms of who benefits and who loses from changes to the system. But do not trade tax simplification for tax fairness. We can have both!

• Promote tax and economic literacy that illuminates the relationships among tax collections, government spending, and quality of life. Encourage broader public dialogue and participation – especially of women – in setting fiscal and social policies.

The National Council for Research on Women is a network of 100 leading U.S. women’s research and policy centers, with a growing international reach. The Council uses the power of its women’s research network to inform debate, policies, and practices, and build a more inclusive and equitable world for women and girls. For more information visit www.ncrw.org or contact Tonni Brodber 212-785-7335 ext. 219

Recent Tax and Income Trends among High-Income Taxpayers, Friedman, Joel, Isaac Shapiro, and Robert Greenstien. www.cpbb.org April 13, 2005

http://www.cbpp.org/1-29-06tax.htm

The report is co-authored by Mimi Abramovitz, a professor at the Hunter College School of Social Work, and Sandra Morgen, director of the Center for the Study of Women in Society and professor of anthropology at the University of Oregon, with the National Council for Research on Women and published by the Feminist Press. Order the book today!