A Tax Perspective on International Women’s Day

March 8, 2017

Misha Hill
Policy Analyst

Thursday, March 8 is International Women’s Day. The day draws attention to the progress that has been made and the work that still needs to be done in advancing gender equality. Many campaigns on issues like equal pay or paid family leave acknowledge that economic policies impact women and men differently. But we often overlook the role governments’ budgeting and taxation practices can play in advancing or preventing progress.

Researchers in Western developed countries like the United Kingdom have noted how severe budget cuts in that country placed more of the financial burden on women than men. Because we don’t yet live in an equal society, women earn less than men, receive more public services than men, and are more likely to bear the responsibility of raising children on their own. This means that revenue cuts that impact public programs disproportionately harm women.

A diverse group of ambitious countries, like Sweden, Uganda, and South Korea, have adopted gendered budgeting which intentionally considers the differential impact of revenue changes on women and men. These practices recognize that you can’t address the issue of women’s stunted economic gains if you don’t know how policies are contributing to the problem.

In the U.S., we are a long way from incorporating a gendered lens into our budgeting practices. But we do have several tax credits for working families that do practically (even if unintentionally) target women. As a result, policies that decrease the value or narrow the eligibility of these credits disproportionately impact women. Federal credits include the Child and Dependent Care Tax Credit, which offsets some of the child care costs incurred by women who work outside the home; the Child Tax Credit, which offsets some of the additional costs of raising children and recognizes the importance of investing in the next generation of workers; and the Earned Income Tax Credit (EITC) which boosts the wages of low-income workers.

Some states offer state versions of one or more of the federal credits—only New York and Oklahoma offer versions of all three. But in most states the credits are not refundable. This means a low-income woman can only reduce the tax she would owe and cannot use the refund to pay towards the additional expenses related to her health care or child care, or to boost her pay to compensate for the wage gap.

The effectiveness of these credits is in the hands of lawmakers. One way federal lawmakers can improve the credits is by indexing their value to inflation so they keep place with the increasing costs of child care and other living expenses. Lawmakers in states without these credits that support working families should establish them. This year we’ve seen proposals to establish EITCs in Georgia, Hawaii, Missouri, Montana, and Utah; and a proposal to make Washington state’s EITC fully refundable.

We’ve got a long way to go before we collect and distribute revenue in a way that’s fair and equitable to all women—we haven’t done anything through the tax code to address the economic disparities of women of color or lesbian, bisexual or transgender women—but we have the tools to begin making some progress.