The U.S. economy will not operate at its full potential unless government and employers remove impediments to full participation by women in the labor market. The failure to address structural problems in labor markets, tax, and employment policy that women face does more than hold back their careers and aspirations for a better life. Barriers to participation by women also act as brakes on the national economy, stifling the economy’s ability to grow. To address these problems, The Hamilton Project published this book featuring a host of public policies to promote women’s economic opportunity.
Ordinarily, the progressive income tax system acts to mitigate differences in before-tax earnings. However, the tax treatment of married couples tends to raise the tax rate faced by the spouse who is the lower earner in a couple. This group of spouses, often referred to as secondary earners, is still predominantly female. Consequently, the current tax treatment of married couples reduces wives’ labor force participation and creates other inefficiencies. LaLumia proposes a new second-earner deduction equal to 15 percent of the earnings of a lower-earning spouse. The proposed deduction would raise the after-tax return to work for many wives, encouraging an increase in married women’s labor supply, and would reduce marriage penalties on average.