If our tax code went to the hospital, it’d be for hemorrhaging because it’s bleeding inequity. Not only do women lose a larger share of their incomes to taxes, but they also receive fewer benefits from the very initiatives their tax dollars fund. We’ve seen this play out most recently in the Infrastructure Bill.
Taxes wear many hats. They raise revenue. They incentivize behavior. They fund investments. And, in their current form, they propel a reckless flywheel of inequity. Considering how gender equity could expand the U.S. economy by $3.1 trillion, it is fiscally responsible for us to restructure our tax and spending system, so that it no longer drains us of sustainable prosperity and growth.
Taxes look different through the gender equity lens
Our tax code didn’t always penalize women so egregiously. In the 1960s, the top .01% paid approximately 70% of their income in federal taxes. By 2004, however, the share of the ultra-wealthy’s income going to federal taxes dropped to 35%. This massive drop accentuates one of the major, if not the major, defects in our tax code. That is, in its current form, our tax code favors people who earn their income through inherited wealth and investments versus through labor.
Through the gender equity lens, white men are the majority of those who earn their income through wealth and investments. And men also dominate the highest echelons of wealth holders. Single Black women hold 9 cents in wealth for every $1 held by white men. A cursory glance at the Forbes 400 reaffirms this gaping wealth discrepancy: Of the 400 richest people in the United States, 86% of them are men.
A tax code that favors people who earn income through wealth (disproportionately men) at the expense of people who earn their income through labor (disproportionately women) inhibits the latter’s ability to accrue wealth. To give just one example of what this looks like in practice, consider retirement savings. Many tax-privileged retirement accounts depend on steady, full-time employment. Since women are nearly twice as likely to work part-time and take time out of the workforce than men, they are less likely to reap the benefits of these wealth accumulation vehicles. Indeed, research shows that the top 20% of income earners enjoy the greatest benefits from tax-privileged retirement accounts.
And even if women have access to tax-privileged retirement accounts, the ability to contribute to them depends on the amount of income at one’s disposal, of which women have less. In 2021, 23.4% of working men compared to only 11.1% of women had incomes of $100,000 or more. Besides, the aggregate gender pay gap has barely budged over the past decade, narrowing from 82.2 cents in 2011 to 83 cents today.
For the record, the recently passed Inflation Reduction Act does little to remedy the capital gains arbitrage that distorts upward and equitable economic mobility. So while the wealthy ride the glass escalator to new heights, the poor and middle class blow out their VO2 max on the glass treadmill of misery.
Raising revenue through taxation is only one side of the equation
The government raises revenue to fund projects that allow you, me, and the entrepreneur next door to live relatively pleasant lives. When done equitably, taxes fund freedom—freedom so that we can pursue opportunities in our bespoke best interests. When done inequitably, however, taxes curtail freedom by limiting the range of opportunities available to us. The Infrastructure Bill is an excellent example of the latter.
In its current form, the Infrastructure Bill preserves existing inequities through gendered job creation. In other words, women are disproportionately funding the very bill that’s screwing them over in the labor market; the Infrastructure Bill intended to create or save 15 million jobs in the name of 21st century, U.S.-led innovation.
Yet despite having accounted for 57.5% of the five million pandemic jobs lost at the time of the Infrastructure Bill’s passing, women stand to gain only 23.3% of the 15 million jobs it will create. That’s a 34.2 point gender gap between the jobs lost during the pandemic and the jobs we’re choosing to bring back with the infrastructure package.
Women support a tax system that doesn’t support them
Women have been doing their part to get ahead. They’ve increased their educational attainment rate and were the most educated cohort in the workforce pre-pandemic. They’ve increased their labor force participation rates and in doing so, generated $2 trillion in dividends for the US economy since 1970. They’ve increased their share of financial support for US households, and today, 28 million children depend on a breadwinner mom for economic security. Yet women continue to be walloped by waves of inequity.
They hold 67% of student loan debt. They work 58% of minimum wage jobs. They pay 7% more for “pink” goods and services half of the time. They face .04% higher mortgage rates than men. They make up 56% of those living in poverty. They perform 90 more minutes of unpaid labor per day than men. And now we see that they disproportionately support a tax system that doesn’t support them.
If we want to reap gender equity’s $3.1 trillion upside, we need a tax system with equity embedded in the core. Gender-based budgeting can help us analyze how different cohorts of the population are burdened by or benefit from taxing and spending. Then we can use those gender-based insights to reform our fiscal operating system, and in doing so, expand the economic pie for all.
Katica Roy is the CEO and founder of Pipeline Equity.