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How the tax system affects women's access to paid work.

'... the full and complete development of a country, the welfare of the world and the cause of peace require the maximum participation of women on equal terms with men in all fields ....'

United Nations, Convention on the Elimination of All Forms of Discrimination against Women, Preamble (1980)

I The Political Economy of Women: Too Much Work, Not Enough Money

In the age of equality, women's economic lives remain quasi-feudal: women who cannot earn enough cash money to support themselves and their dependents meet their subsistence needs either by entering into relations of economic dependency with more powerful parties (with another adult, or with the state), or by making up the shortfall with large amounts of unpaid work--or by a combination of both. Decades of research have established that this description of the political economy of women (1) varies only in degree from one country to another, but not in substance. (2) The gaps between the 'women's economy' and the 'men's economy' are so significant that it is no exaggeration to think of them as two separate spheres.

The key factor that keeps women trapped in the 'women's economy' is the expectation that women ensure that essential care giving and other unpaid work gets done when needed, and that they give priority to unpaid work even over paid work if the circumstances so require. (3) This trap is constructed by the intersection of three deeply-entrenched social and economic realities: First, even when women's labour force participation rates are similar to men's, women still do not earn as much as men, and thus have less money to pay for third party care giving. Second, without money to pay for care giving, women increasingly juggle care giving responsibilities with financial needs by turning to 'precarious' work (4)--work that is intermittent, part-time, seasonal, occasional, temporary, informal (unreported), or without full benefits. Third, fewer women anywhere actually get to 'choose' whether they will engage in paid work or unpaid work as growing numbers of households feel that they really need at least 1.5 adult incomes to make ends meet, and as social assistance is increasingly delivered as 'workfare.'

II International Trends in Taxes, Spending, and Women's Equality On the international level, there is a slow trend toward greater gender equality in many high and medium development countries despite these realities. Equality gains are produced when women's economic security increases, as women obtain a critical share of leadership positions, and as customary expectations about women's roles lose their grip. The rate of progress, however, will be affected by governmental budgetary, tax, and spending policies.

Since 1995, the UN has been monitoring basic indicators like men's and women's after-tax incomes, degree of engagement in paid work, shares of unpaid work, and number of elected and high-level positions to measure women's equality. Three insights have emerged from this data. First, the rate at which women can gain equality will be affected by the relative wealth or poverty of the country as a whole. Second, major shifts in political-economic arrangements, like privatization, trade liberalization, neo-conservatism and neo-liberalism, economic crisis, and armed conflict, will usually have disproportionately negative effects on women as compared to men, because women are expected to constantly adjust their paid and unpaid work to respond to even fairly small changes in external and household circumstances.5 Third, major budgetary, tax, and spending changes appear to negatively affect women more than men when the level of women's political and leadership involvement is too low for their needs to be taken seriously.

The experiences of Canadian women illustrate these effects. Canada was ranked 1st in the UN's 1995 human development index (HDI; on 1990-1993 data). However, it was only ranked 9th in the gender-related development index (GDI) introduced that year. Within a few short years, it rose to 1st in both the HDI and the GDI as acceptance of gender equality was spurred on by court enforcement of the Canadian Charter of Rights sex equality guarantees, new understanding of sex discrimination, Canada's signing of the UN Platform for Action at the 1995 Beijing conference, and national implementation of gender mainstreaming and gender analysis policies.

By 2000, however, budgetary, tax, and spending changes began to undercut women's economic equality. These included tightened eligibility for unemployment insurance benefits, maternity leave, and parental leave, spending cuts for child care, privatization of government services, the practice of making low-income benefits more 'target efficient' by reverting to the 'male breadwinner' model of family assistance, and the shift from social assistance to 'workfare.' At the same time, business 'competition' tax cuts for high income earners and corporations were introduced. By 2001, Canada had dropped to 3rd in the GDI (1999 data) and to 7th in the 2006 GDI (2004 data). Other gender equality indices ranked Canada as low as 14th and 18th during the 2006-2007 period.

Many observers believe that the fragility of Canada's high ranking in the GDI was due to the fact that its Gender Empowerment Measure (GEM), which measures women's share of leadership positions, remained lower than its GDI ranking throughout these periods. Without women to speak out on the national stage about both the positive and negative gender effects of major policy shifts, policies were not transparent enough to hold leaders accountable to women.

The trend toward state competition for foreign direct investment and rewards for rich domestic investors has had similar effects in Ireland. At the moment, Ireland is described by politicians around the world as an 'economic miracle,' with the highest overall levels of labour force participation and the lowest corporate tax rates for offshore investors anywhere. This miracle is reflected in its HDI rankings, which rose from 17th in 1995 to 5th in 2007 (2005 data).

The Irish 'economic miracle' may well have taken place at the expense of women, just as Canada's economic growth and burgeoning budgetary surpluses took place at the expense of women. Irish women do have very high rates of labour force participation, but they are still only ranked 15th in the 2007 GDI. This is due to two facts: they still have the highest rates of part-time, seasonal, occasional, contract, or shadow employment of all women in high-maleincome countries (Norway, Canada, Ireland, US, and UK), and they still face the biggest income gap--47%--in those countries (the average annual Irish male income is US$40,000, the average for women is $21,076). For purposes of comparison, the average annual male income in Israel in the 2007 GDI is only US$31,345, but the average female income in Israel for the same year is almost the same as Irish women's incomes--$20,497. This means that the Israeli income gender gap is much smaller than Ireland's--35%--virtually identical to the gap in Canada, France, the US, and the UK.

The fact that Irish women appear to have been left out of the 'economic miracle' is not surprising in light of their relative lack of political power. Ireland's GEM was 19th in 2007, even lower than its GDI rank (15th). This does not bode well for women in Israel, ranked 28th in the 2007 GEM. If Israel decides to follow the fiscal examples of Ireland or Canada, can women in Israel exercise enough real political power to prevent similar deterioration in their standing? (6)

III The Link Between Taxes and Women's Labour Force Participation Men tend to have higher rates of labour force participation and lower 'elasticities' in their attachment to paid work. 'Elasticities' refer to the extent to which workers are likely to substitute leisure for additional paid work, or to substitute leisure for additional income, when incomes or unpaid responsibilities change. Women tend to have lower rates of labour force participation but higher 'elasticities,' because they respond more quickly to smaller changes in total income than men. (7) Even if women attain the same rate of labour force participation as men, they do not necessarily have the same quality of work as men. And women may have high rates of paid work but still have higher elasticities so long as they are expected to juggle paid work with unpaid responsibilities and household income needs. (8)

Women, more than men, actively balance their mix of paid and unpaid work in this way: The combination of less stable work, lower incomes, and gendered social responsibilities forces women to engage in an 'economic calculus,' weighing costs and benefits of paid work against other support options and unpaid responsibilities. (9) Taxes affect all incomes and all costs; thus, they are an inevitable part of that calculus.

IV Tax and Spending Barriers to Women's Paid Work

The tax and spending provisions that enter into women's paid-unpaid work calculus cover the range of budgetary, revenue collection, and expenditure items. Reduction of overall fiscal capacity through comprehensive tax cuts, which is a current trend, can be used to create incentives for those who benefit from the cuts and can simultaneously be used to justify new limits on social and low-income spending. Educational institutions, health care, and child care are all essential to women's ability to juggle paid and unpaid work at optimal levels. Cuts to any one or more of those basic spending envelopes directly affect women because this increases the cost of replacing previous public services.

Specific tax provisions and tax-linked benefits also affect women's paid-unpaid work decisions and labour force participation rates, some more obviously than others. This discussion is designed to illuminate how the use of large numbers of tax/benefit measures that have a negative gender impact on women in one tax system reinforces women's income gaps and creates disincentives to women's paid work. It is also outcome focused: A growing body of research demonstrates that as gendered tax/benefit barriers to paid work are eliminated, after-tax income gaps can shrink and men and women can share unpaid work more fully. (10)

V Gender Impact of Cutting Personal, Corporate, and VAT Tax Rates

Israel is not alone in the rush to cut the highest personal income tax rates, corporate income tax rates, and flat-rated consumption taxes like the VAT. The prevailing belief is that tax cuts create incentives to work harder and longer, and also attract high-income taxpayers to lowtax rate countries. However, these tax cuts negatively affect women, for two reasons. First, tax cuts reduce the government's ability to fund essential public services, especially in the health, child care, and education areas. Second, tax cuts will always benefit those with high and middle incomes, but it is almost impossible to cut tax rates in a way that can make any real difference to those with low incomes. Low-income workers frequently have no income tax liability anyway, so income tax cuts will not help them, while small cuts make little financial difference.

Because women's incomes are, on average, so much lower than men's in Israel, all types of tax cuts will give the biggest benefits to men and little or no benefit to women. Thus tax cuts are described as having negative gender impact on women, because they actually increase men's after-tax incomes more than women's and widen the gender gap in after-tax incomes. The details of how this happens with cuts to personal income taxes, corporate income taxes, and the VAT are discussed below:

Personal income tax rate cuts:

Since 2005, the Israeli government has been implementing staged cuts to personal income tax rates. The first step has been to reduce the top tax rate from 49% in 2006 down to the current 47% rate for 2008. These cuts will continue,1% per year, until the highest tax rate is 42%. Some cuts to the other rates are also planned for 2009-2014.11 Table 1 sets out the rates for 2008.

The average annual women's income in Israel was NIS 65,124 in 2004. (12) Even adjusted for inflation, income at that level is largely tax exempt. Most of an income of NIS 65,124 will fall into the first income tax bracket, which is taxed at the 10% rate. A small part of that income (NIS 12,844) will fall into the second income tax bracket, which is taxed at 16%. However, even a woman with no children can claim a tax credit that insulates her first NIS 53,844 from income tax liability each year. (13)

The bottom line in this example is inarguable: Given how low women's average incomes are, cutting the highest income tax rates--the rates paid on incomes over NIS 435,121--cannot possibly be of any assistance to women who earn average wages.

Even when the 10-35% rates are cut beginning in 2009, they will not provide incentives for paid work for women either. As can be seen from table 2, women in each of the main occupations earn as little as 53% of men working in the same occupation. For the reasons outlined above, women in the first three or four occupation categories will pay little or no income taxes because their incomes will be well under the tax-free zone created by their personal credits (up to NIS 53,844). Women with children's tax credits will have larger taxexempt zones; for example, a woman with three children will not be taxed on income under NIS 81,684.

Income rate cuts can be done in other ways, but the result is invariably the same: Without carefully designed earned income tax credits (discussed in the final section of this paper), women will receive the least or even negative incentives for paid work, while those with the highest incomes--mainly men--will receive the greatest after-tax benefits from rate cuts, and thus receive large ongoing tax incentives for paid work.

Corporate income tax rate cuts:

Part of the 'new wave' of international tax competition is to cut domestic corporate income tax rates while cutting the top personal income tax rates in order to attract foreign direct investment. In Canada, corporate income tax rates stood at 40% until 1971, but decades of cuts have reduced the combined federal-provincial corporate tax rate on small business corporations to 18.1% (2008), and the federal corporate income tax rate is scheduled to fall to 15% by 2012 (provincial rates added on top). A similar pattern is unfolding in Israel: The general corporate income tax rate has fallen rapidly from 36% in 2003 to 27% for 2008, and is scheduled to fall to 20% by 2014.

Corporate income tax rate cuts have a whole series of gender effects, all of which contribute to the widening of after-tax income gaps between women and men. First, the radical shift of income taxation away from corporations and onto labour incomes means that income taxes sit more heavily on workers at all income levels, especially those whose incomes are too low to receive any benefits from cuts to their personal income tax rates--women. Second, systematic cuts to high personal income tax rates and corporate income tax rates are usually coupled with systematic cuts in government revenues, leaving less revenue available to provide essential services, and even opening the door to privatization of services and/or increased user fees or special levies to fund those services.

Third, corporate income tax cuts increase the total amount of after-tax profits available for distribution by corporations to their shareholders, and those shareholders are predominantly men. This means that these tax cuts, which may seem to be completely irrelevant to women's lives, shift more after-tax income to men, and relatively little to women. Research on men vs. women's ownership of corporate shares in Israel would need to be carried out to identify the gender breakdown, but, for an example, in Canada, 63% of all corporate shares appear to be owned by men, and only 37% by women. This means that the increased flow of after-tax profits to men via lightly-taxed corporations provides men with a unique form of tax incentives for their business efforts. In contrast, women, who have much more limited access to venture capital and who are under-represented on most corporate boards,14 receive little incentive for their business efforts from these types of cuts.

Fourth, the very legal nature of corporations enables their owners to accumulate after-tax profits in the form of capital assets (shares) that grow in value faster than savings from aftertax labour incomes can--especially when many personal income tax rates will be higher than the corporate income tax rates (table 1) and also higher than the tax rates applied to capital gain on shares.

Cuts to VAT rates:

Because the Value-Added Tax (VAT) is a flat-rated tax, it is regressive in impact: It takes a larger percentage of income from those with lower incomes than it does from those with higher incomes, and high-income individuals can avoid the tax entirely if they can save money instead of spending it on taxable goods and services, and invest it.

Just as increasing tax rates has distributional impact, so too does cutting tax rates. Israel's program of VAT cuts is clearly beneficial to women, in that the reduction from 18% in 2004 to the present 15.5% reduces the overall costs of basic items and work-related expenses for women. However, the value of the tax cut (2.5% over four years) puts much more money back in the pockets of those with high incomes, because they can afford high-price consumption. At the same time, the remaining 15.5% VAT rate is still extremely high for those living on low incomes, single parents, and parents with heavy support responsibilities.

Because VATs are considered to be so regressive, extending a direct tax subsidy or refundable tax credit to those with low incomes can alleviate some of the harshness of this type of tax at low income levels. By way of example, Canada provides all individuals with low incomes a nontaxable credit that effectively pays for the Canadian VAT (known as the GST) on approximately US$5,000 worth of goods and services each year. This credit is phased out at the US$20,000 level (approximately), so that the benefit only goes to those with the greatest need.

Without such a credit, women who do engage in paid work incur this high 15.5% tax on all goods and services necessary to employment. It is well known that paid work does increase personal and household expenses, including care expenses, so the high VAT magnifies this barrier in a way that creates implicit incentives to shift to unpaid work when the wage to be earned in paid work is not enough to offset expenses.

VI Child Care Expenses and Women's Access to Paid Work

For women who are responsible for children, lack of adequate child care resources is the biggest barrier to women's labour force participation. In addition, the age of children and the hours that daytime care is available in the form of public education is a major factor in pushing women into part-time, occasional, and seasonal employment. Literally, women with children have to organize their paid work around their unpaid responsibilities. Other care responsibilities reinforce these patterns, setting women up for lifelong barriers to paid work.

The more fully the tax-transfer system removes all costs for child care from women, whether through some combination of tax deductions and refundable credits via the income tax system or through in-kind public services, the higher women's rates of labour force participation will be. (15) These same changes also help close the gender income gap between men and women.

Most countries use a combination of direct spending and tax provisions to support child care resources. Direct spending in the form of public subsidy for low-cost neighborhood child care facilities integrated with early childhood education and early formal school is best, because these areas of public funding can be coordinated and many efficiencies are possible. Tax provisions are the worst choice, although leaving room for business and professional workers to make personal arrangements promotes women's equality in all occupations. Three of these options are discussed here: tax relief for child care expenses (usually only partial relief); direct financial assistance to parents, who may use it for child care expenses (also usually partial); and in-kind child care through government services. Most women will agree that even minimal assistance with child care expenses is far better than nothing. However, the first two options have serious negative gender impact on women, leaving provision of in-kind child care services available to all parents as the best way to promote women's equality and increase women's engagement in paid work:

Income tax deductions for child care expenses:

In most countries, the percentage of women whose incomes are so low that they pay no income taxes at all is continually increasing. In Israel, 62.1% of working women pay no income taxes.16 In comparison, it is estimated that in Canada, 40.8% of women filing income tax returns will pay no income taxes (2008).17 In such circumstances, offering tax deductions for child care expenses will provide absolutely no financial assistance to the women who need it the most--women who are working in the zero-tax income zone.

Even if tax deductions could be recast as refundable income tax credits (refundable: the tax benefit is paid in cash in cases in which incomes are too low to gain from tax reductions), women at nontaxable income levels would still be unlikely to afford to pay child care expenses out of pocket. Refundable tax credits would literally have to provide 100% of the out of pocket expense up front for this avenue to work at all. And of course, once a government decides to fund child care so fully, the economic efficiencies of funding public services as compared to providing full reimbursement for private child care expenses suggest that the money is far better spent by investing more heavily in public funding of child care services, at least for women in the zero-tax income zone.

But what about the 37.9% of women in Israel who will have some positive income tax liability? What is the gender impact of permitting income tax deductions for child care expenses for this group of women? As table 2 shows, women who may have some income tax liability have average annual incomes in the NIS 61,000-125,000 range. The highest incomes will be taxed at the 26% rate, but incomes under NIS 90,000 (approx.) will be taxed at the 16% rate (table 1). This means that if child care expenses could be deducted, women would only get 16% or 26% of that cost back in the form of income tax reductions--just a small fraction of the actual cost.

Professional and self-employed women appear to have the opportunity to claim these types of deductions as the result of the Pery decision, which has allowed a woman lawyer to deduct the bulk of her private child care expenses as a business expense.18 This is an important breakthrough for self-employed women. However, it only levels the playing field for women in this one occupational area (women who are business owners and not employees), and is not an appropriate model for the rest of women's child care needs. Indeed, if public child care resources could be expanded further, it would be to the advantage even of women in Pery's position.

Direct cash subsidies to parents for child care:

In the Pery case, the Israeli government tried to convince the court that the children's allowances received by women are government subsidies for child care. Given the political history of these allowances, this is inaccurate; these allowances began as poverty relief and, when larger, also provided an incentive for having a large number of children, as the amount of the subsidies increased with the number of children. As currently structured, children's allowances are too small to cover child care expenses in any event.

The demand for 'cash for care' subsidies has been increasing in recent years as part of neoconservative attempts to reinforce traditional family structures. For example, Canada has recently shifted part of its funding for low-income child allowances (delivered through the tax system) to a new 'universal child care allowance' which is a direct cash grant to all parents of young children, regardless of the parents' incomes. The amount of the allowance is far too small to pay for anything but a few hours of child care a week--not even enough for a parent who works part time. And it is much more expensive than the low-income allowances, because it is paid to all qualifying parents without regard to whether any child care is in fact needed and without regard to income levels.

Research data on the impact of such direct subsidies to parents is that they result in reduced rates of women's labour force participation when compared with the effects of government subsidized child care services. (19)

Government subsidies for in-kind child care:

This policy approach moves completely away from using the income tax system for child care purposes. (Continuing to permit business deductions for child care expenses incurred by higher-income women would not be inconsistent with this option, because of significant differences in the nature of business work.) Instead, parents can access government subsidized child care.

Subsidized child care programs can of course be a matter of degree. Parents can be required to make some partial payment for service once income reaches a certain level, although tying this payment to family income would still be a joint benefit measure that would create a disincentive to women's paid work (joint measures are discussed below). Higher income parents can still treat their partial payments as tax deductions, although this still benefits few women.

The best model is the Swedish one, which has a female labour force participation rate of 80%. Sweden has moved away from basing its tax system on adult relationships, and it has moved a number of issues out of the income tax system completely--particularly its child care system. Sweden provides child care benefits through state-funded childcare, which reduces the need to adjust income tax liability in light of child care expenses. Sweden has managed to achieve both neutrality as to family relationship as well as gender and income equity in the design of its tax system, and to increase access to child care services on a subsidized basis for those who need it; both these policy changes minimize barriers to women's labour force participation in Sweden. (20)

Other policies play a role in this area as well. Ensuring that both parents are entitled to and actually use parental leave helps reduce the allocation of unpaid child care work to women alone. Non-discrimination laws that prohibit employers from taking gender, parental status, or expectation of maternity leave into consideration in hiring and promotion decisions can assist, as can ensuring that men are not denied their parental leave rights. In the end, however, the most important policies continue to be making subsidized child care services available to those who cannot afford them, and providing equitable access for those with middle and high incomes as well. (21)

VII Gender Issues in the Taxation of Women's Employment Income

The high costs of work-related expenses, gender differences in the value of employment benefits to women, and the taxation of employment benefits can also affect the value of women's employment income, especially because most women will earn significantly less than men in their occupations. Two problems are discussed here: the general lack of deductibility for employment expenses, and the impact of taxing some types of employment benefits.

Non-deductible employment expenses:

When women enter into paid work, the costs of transportation, additional equipment, clothing, and purchased meals, household services, and care giving have been estimated to run as high as 18 to 30 percent of a couple's after-tax income (Canadian study). Child care expenses form the largest part of this increased expense, but the other outlays are not insignificant. (22) Women's expenses are not seen as 'necessities' in the same way that men's work expenses are, and fewer women than men run businesses, which reduced women's opportunities to treat these expenses as business deductions.

Tax relief would be useful to address this problem. The US deductibility model permits some specific types of work-related expenses to be deducted; Canada provides a blanket tax credit worth about US$200 per year to all employees. Neither structure is perfect; it would be far better to give low-income workers refundable tax credits so most women will still receive some positive relief when facing this barrier to paid work, and so that men in the same employment situation can obtain this relief as well.

Gender impact of employment benefit programs:

Employment benefits are often not offered equally to all employees. High-level management will have access to valuable stock option plans while line employees will receive the minimum requirements. Part-time workers may have difficulty enforcing their rights to equal employment benefits. Where employment benefits include such things as additional private insurance or other family benefits, if both spouses work and both have such benefits, they are, in a sense, 'wasted' on the second spouse to receive them, and indirectly reduce the overall rate of compensation to that second spouse. Where these types of problems have emerged, a combination of strict enforcement of worker's rights and giving second workers the right to exchange duplicate benefits for higher pay have been beneficial. (23)

At the same time, taxing employment benefits must be done very carefully. It is essential to equity to make sure that employee stock options, for example, do not escape taxation. At the other end of the range of employment benefits, however, taxing them can worsen women's situation. For example, the plan in Israel to impose income tax on employees receiving employer's contributions to advanced training funds beginning in 2009 would have a particularly harsh effect on women employees, whose marginalized labour force positions make such training much more important to them. Even worse, this plan is designed to help find the funding to provide income tax rate cuts for the 10% through 35% rates. With some 62% of employed women earning too little to pay income taxes in the first place, increasing the taxable incomes of all employed women to give some of them tax cuts will do nothing to assist women, and can only hurt them, relative to men. (24)

Similar to this is the suggestion, fortunately defeated, that even women with no incomes should pay health taxes by forfeiting a part of their children's allowances. This is the type of fiscal thinking that grows as tax rate cutting strategies begin to deplete government resources, but they have very negative gender impact on women particularly.

VIII Family Unit Rules Reinforce 'Male Breadwinner' Models of Tax Policy

Women are still expected to be able to earn enough income to not only meet household needs in a variety of circumstances, but also to meet family needs for unpaid work that is too expensive to replace with hired services. Examples abound: women in paid work have much less time for child care, shopping and cooking meals, household maintenance, care of older parents or disabled family members, laundry, etc., but if they are in low-paid occupations, they are working because of income needs, and thus will be unlikely to have extra cash to hire replacement services. This leaves many women trapped in economic dependency on another adult, the state, or both.

Ongoing research has shown that it is important for all tax and benefit measures to treat women as separate legal individuals, because even those that use family income concepts will reinforce the 'male breadwinner' model of public policy and maintain barriers to women's paid work. (25)

Two specific aspects of this underlying structural issue are discussed here: the use of family income or household income concepts to regulate access to some low-income tax or benefit measures, and the negative gender impact of the new Israeli earned income tax credit (EITC) on married women with low incomes and low-income spouses.

'Hybrid' joint tax and benefit measures:

Growing numbers of instruments are being enacted to replicate on a smaller scale the effects of income splitting in specific policy contexts. These types of measures are often integrated into systems, like the Israeli tax system, that legally treat each spouse as a separate individual.

Joint tax and benefit measures all have one key characteristic: Joint provisions define eligibility for or the amount of tax breaks or benefits by reference to family or couple income. An example would be replacing women's personal and child tax credits with family or household credits that can be claimed by either parent. Letting the higher income spouse use both men's personal credits and women's personal and child tax credits would enable more couples to fully use those credits (Brender estimates that some 77% of women's credits are not used (28)), but it would deprive all women of the tax incentives created by these gender-specific tax-free zones. At the same time, it would expand the amount of tax-free income the higher income spouse (predominantly the husband) could earn, and would create on a more modest scale the same incentives against women's paid work that are seen in full joint filing systems.

Regardless of the specific policy objectives that lead to enacting these types of provisions, all joint measures have the same negative gender impact on women's labour force participation as does full income splitting--they create disincentives or tax penalties for women to enter into paid work, and they simultaneously reward couples in which the lower income spouse (usually the woman) specializes in unpaid work. (29) While the impact of these joint provisions is smaller in degree, they have the same qualitative impact of full income splitting, and, when used in a number of different tax and benefit provisions, they can, together, create much of the same negative impact on women's labour force participation rates as full income splitting. (30)

Many countries have now moved away from both full joint filing and away from more specific joint tax and benefit programs in their efforts to ensure that their tax and benefit systems are truly based on the individual, and do not just give lip service to that approach. There is growing evidence from research that as these changes have taken place, women's involvement in paid work has increased with individual taxation. Spain and Luxembourg, which still aggregate family income, have the lowest women's labour force participation rates in Europe (25.3 percent and 33.6 percent, respectively). (31) By contrast, countries such as Denmark, Finland, and the United Kingdom, all of which employ the individual as the tax unit with relatively few family-income based provisions, have among the highest rates of female workforce participation in Europe, and Sweden, which has almost no joint provisions, has the highest participation rate at 80%. (32)

Politically, it is difficult to use the individual as the strict basis of taxation in all contexts. Canada has replaced both its old family allowances and child tax credits with fully refundable child tax benefits for those with low and modest incomes. However, even though measuring eligibility by couple income disadvantages women, it is politically very popular as being 'target efficient.'

Earned income tax credits--new hybrid joint tax measures:

Earned income tax credits (EITC) are the newest hybrid joint tax measures to come onto the scene. These credits are ostensibly designed to help overcome the 'welfare wall' that faces those on social support payments who wish to enter paid work, but cannot live on their earnings alone. Earned income tax credits are a form of 'negative income tax,' designed to provide extra cash in the form of 'matching' government funds not just for those with children, but also for single individuals and couples.

Earned income tax credits are uniquely capable of providing incentives for paid work for women, because they can reach into the low-income tax-free zone that women inhabit, and can still provide positive and highly-focused benefits that can support women's movement into paid work even if their potential wages are low. However, this is true only if the EITC has these features:

* EITCs must be fully refundable (that is, payable if tax reductions are not relevant because incomes are low and there is no tax liability);

* for equity reasons, the amount of government revenue devoted to funding EITCs should be proportionate to the revenue lost by granting tax cuts to high income taxpayers;

* it is important to treat married women as separate individuals in establishing eligibility for EITCs, and not count spousal income in determining eligibility; if married women are forced to aggregate their incomes with their spouses in determining eligibility, then much of the negative gender impact of general income tax rate cuts on women will remain uncorrected.

* EITC eligibility should bring with it automatic vouchers or grants for whatever child care is needed to enable the recipient to go into paid work;

* the taper-off zone for such credits should be long enough to ensure that loss of the credit does not create sharp income tax increases for women in the taxable zone.33

Unfortunately, the new Israeli EITC (34) does include most of these features. When some of the features listed above were tested when the government was designing the EITC, it was found that using the individual model would provide a stronger incentive to paid employment, but this was rejected due to the cost of that model. The justification for going with a joint form of EITC was to turn what was supposed to be an incentive to enter paid work into a poverty support program. However, because of the gendered allocation of incomes in Israel, this also turns the EITC into a provision that implicitly reinforces the 'male breadwinner' model in tax policy:

'A system that offers benefits to all individuals at low wage levels, without taking into consideration family composition or the spouse's income, will have a relatively large effect on employment but at a relatively high cost.... In contrast, a focused policy which conditions the payment of benefits on the composition of the family and takes into account the income of the household, is less effective in increasing employment but is highly effective in reducing poverty. (35) (emphasis added).

In the larger context, this choice between providing more anti-poverty supports at the expense of supporting women's entry into paid work reflects global priorities and is the product of the tax-slash approach to international competition for mobile forms of capital investment, in the search for another Irish 'economic miracle.' Unfortunately, this structure for the EITC will not only impose a 'marriage penalty'36 on couples, as it has done in the US, but it will also create a very different type of tax incentive--for low-income women to become single mothers.(37)


On a deeper level, the priorities reflected in the new Israeli EITC are symptomatic of the fundamental problems that face all women who seek to eliminate the in-built fiscal biases against women's equality. All of the tax and tax-related provisions discussed in this paper have the same effect: all of them reinforce existing disincentives for women's paid work, and thus, inferentially, reinforce women's continued responsibility for the bulk of unpaid work and vulnerability to economic dependency on either other adults or on the state.

Israeli women are not alone in the search for solutions to this dynamic, especially as it is heightened by the tax-slash mentality. A major EU study of paid work and child care found that placing the emphasis on anti-poverty and cost containment features when designing low-income provisions will inevitably create new forms of gender bias within national taxbenefit systems. The EC expert panel that conducted this study concluded that 'unless a gender mainstreaming perspective is brought into policy design and evaluation,' 'efforts to "make work pay" for women' will result in 'constructing and reinforcing their role as a "second earner" that is presumed to reside with an employed man in the role as "main earner".(38) Unfortunately, the panel came to the same conclusion that the State of Israel did when it opted for a poverty-reduction version of the EITC instead of an employmentenhancing version: the panel concluded that this tendency will be difficult to overcome politically so long as the focus in fiscal policy remains fixated on the cost implications within the framework of self-imposed fiscal restraints. As was said of similar decisions in the Canadian context, programs supposedly designed to ameliorate women's poverty in the first place are creating a new generation of poverty traps. (39)

Going back to the UN's indicators of gender equality, the strategy for combating this genderminimizing approach has not changed: Increasing women's empowerment in political leadership and key institutions will help create the political will to change the focus of fiscal policy formation. And consistent gender-based analysis in a program of full fiscal gender mainstreaming and gender budgeting in partnership between committed governments and well-funded non-governmental organizations working within supportive regional and international bodies can bring about concrete gender-equal changes.

Respondent: Barbara Swirski--Executive Director, Adva Center

According to the newspapers, in 2009 the income tax breaks are to cost between two and three billion shekels. This break goes mainly to men, due to their higher salaries. Theoretically, women, too have a tax benefit, in the form of the earned income tax credit. Kathleen explained that the way this tax benefit is designed makes it, too, more relevant to men than to women--despite the fact that nothing is written about the benefit being for either men or women. But let us assume that the intent was to provide a benefit for women. The tax break for men is two to three billion shekels, while that "for women" is about 100 million--and I assure you that not even half of that amount will be transferred due to bureaucratic obstacles and women's fear of asking the tax authorities for the benefit.

We need to be smart and understand that when someone says, "We have something for the women," or "We have something for the poor"--the target populations are not going to get very much. Yesterday Kathleen and I had a discussion at the Bank of Israel. Kathy was asked her opinion of the Peri verdict, in which the court ruled that women could claim tax credits for expenses incurred for child care. Kathy stated her opinion and in response it was said, "You have to choose between tax credits and expanding daycare." I asked--and here I quote myself--"Why is there never enough money when it's for women; why are we always being asked to choose between two options?" Generally, when men are involved, they receive this benefit and that one too.

(1.) Margaret Benson, 'The Political Economy of Women's Liberation,' (1969), 21:4 Monthly Review, at 13-27. Benson identifies how women's persistently low incomes, economic dependence, and difficulties in accessing paid work are linked to women's overwhelming responsibilities for unpaid work. Esther Boserup, a development economist, demonstrates how these dynamics pervade the development process and virtually guarantee that unless gender issues are considered very carefully, the development process will reinforce preexisting gender inequalities and can even detract from women's pre-existing autonomy. See Esther Boserup, Women's Role in Economic Development (London: George Allen and Unwin, 1970).

(2.)The best one-volume reference for this data continues to be Naomi Neft and Anne D. Levine, Where Women Stand: An International Report on the Status of Women in 140 Countries (New York: Random House, 1997). Current data is provided in summary form in UNICEF, Women and Children: The State of the World's Children 2007 (NY: UNICEF, 2006), ch. 3, Figure 3.3, at 41, while the UNDP Gender Development Index, published in the UNDP annual Human Development Report, provides detailed data for every country.

(3.) Decima Research, National Profile of Family Caregivers in Canada (Ottawa: Health Canada, 2002), at 6-7, 11.

(4.) See Leah Vosko, Temporary Work: The Gendered Rise of a Precarious Employment Relationship (Toronto: University of Toronto Press, 2000) (also 'contingent work'). Following Vosko's lead, Abetha Mahalingam, et al, have compiled a 'conceptual guide to unpaid work module' documents the many forms that women's unpaid work takes in industrialized economies: unpaid child care and other care-giving; volunteer work; unpaid domestic work; unpaid self-production like growing food, making consumer goods for household; unpaid work in family businesses; privatized services ('shadow work' like self-service in stores, banking); and unpaid work in paid workplaces; online: Genderwork:

(5.) For example, Valentine Moghadam, The Feminization of Poverty and Women's Human Rights (Paris: UNESCO, 2005), SHS paper No. 2, at 3, attributes women's continuing high poverty rates to increasing numbers of women-headed households, longstanding household-level biases against women, and privatization economic policies.

(6.) Two examples in Canada are the federal Liberal Party's carbon shifting plan and the Province of New Brunswick's plan to introduce a flat income tax augmented by carbon taxes.

(7.) See Thomas Mroz, 'The Sensitivity of an Empirical Model of Married Women's Hours of Work to Economic and Statistical Assumptions,' Econometrica (1987) 55, 765-799. This sensitivity is also referred to as 'elasticity.'

(8.) The economic features of women's work lives have been well-documented in the research literature for some time: Women's work is occupationally stratified; their work is significantly more part-time than men's throughout their lives; women tend to find themselves in occupations in which they actually have to work harder than most workers to make the same amount of money; the 'double burden' of paid and unpaid work reinforces the increasing allocation of women to unpaid work; women often find themselves in 'entry level' work whenever their career in paid work is interrupted by family responsibilities. Other cultural factors such as attitudes toward paternal family leave, children's school hours or holiday schedule, or store opening hours also play a role in shaping the organization of women's paid and unpaid work lives. See, e.g., Heinz Konig, Francois Laisney, Michael Lechner, and Winfried Pohlmeier, 'Tax Illusion and Labour Supply of Married Women: Evidence from German Data,' KYKLOS (1995) 48:3, 347-368, at 350; Ruth Lister, 'Women, Economic Dependency and Citizenship' Journal of Social Policy (1990) 19:4, 445-467, at 457, 463; Irene Bruegel, 'Women's Employment, Legislation and the Labour-Market,' in Jane Lewis, ed., Women's Welfare, Women's Rights (London: Croom Helm, 1983), 130-169, at 131.

(9.) This reflects the economic concept of the declining marginal utility of money: Women generally, part-time workers (the bulk of whom are women), and women with children are quite keenly aware of what their marginal income tax rates are, how changes in their incomes might affect their net take-home income, and how the costs of child care or workrelated expenses will affect that bottom line. Those with higher incomes (on average, this will be men) are not so aware of these details because they literally do not have the same degree of 'need' for each unit of their money. See Konig et al., 'Tax Illusion,'at 347; Susan L. Averett, H. Elizabeth Peters, and Donald M. Waldman, 'Tax Credits, Labor Supply, and Child Care,' The Review of Economics and Statistics (1997), 125-135, at 133.

(10.) See, e.g., Janet C. Gornick, Gender Equality in the Labour Market: Women's Employment and Earnings (Luxembourg: Luxembourg Income Study Papers, 1999), at 2, 34.

(11.) Israeli Tax News 2008, online: WorldWide-Tax:

(12.) Barbara Swirski, Analysis of the 2006 Budget Through Gender Lens (Tel Aviv: Adva, 2006).

(13.) Adi Brender, 'Tax Benefits for Women in Israel: International Perspective and Benefit Takeup' (Tel Aviv: Bank of Israel, Research Dept., 2005), at 18 (unpublished; copy on file with author).

(14.) Israel is far ahead of most other countries in the middle and high development categories in securing representation for women on corporate boards, although the trends show some slowing in recent years. However, membership on boards does not translate into equal access to venture capital or the ability to initiate corporatized businesses on the same scale as men. See Euromed, Analysis of the Economic Situation of Women in Israel (EU, 2008), at 28-29.

(15.) Christin Knudsen and H. Elizabeth Peters, An International Comparison of Married Women's Labor Supply (Boulder, CO: University of Colorado, 1994); Lochhead and Scott, Dynamics of Women's Poverty, at 45, 52; Lene Madsen, 'Citizen, Worker, Mother: Canadian Women's Claims to Parental Leave and Childcare' Canadian Journal of Family Law (2002) 19, 11-74, at 65; Averett et al., 'Tax Credits'; Janice Keefe and Pamela Fancey, 'Compensating Family Caregivers: An Analysis of Tax Initiatives and Pension Schemes' Health Law Journal (1999) 7, 193-204, at 193.

(16.) Barbara Swirski, Israel's 2008 Budget Proposal: Through a Gender Lens (Tel Aviv: Women's Budget Forum, 2007), at 3.

(17.) Department of Finance Canada, oral communication (Mar. 13, 2008) (notes on file with author).

(18.) If the government does indeed appeal this ruling, then the fictional Women's Court of Canada 'decision' upholding deductibility of child care expenses as business deductions suggests how Peri's case on appeal might best be framed. In the real Supreme Court of Canada decision (Symes), the court disallowed such deductions, but a group of women lawyers recently produced Women's Court of Canada 'decisions' on that and other cases that had been wrongly decided, and one of those 'decisions' was in the Symes case. See Melina Buckley, 'Symes v. Canada' Canadian Journal of Women and the Law (2006) 18:1.

(19.) Pal Schone, 'Labour supply effects of a cash-for-care subsidy' Journal of Population Economics' (2004) 17:703-727.

(20.) O'Donoghue and Sutherland, 'Accounting for the family,' at 579.

(21.) Florence Jaumotte, 'Labour Force Participation of Women: Empirical Evidence on the Role of Policy and Other Determinants' (Paris: OECD, Economic Studies, 2003).

(22.) S. A. Rea, 'Taxes, Transfers, and the Family' (1984), 34 Univ. Toronto Law Journal 314, at 324.

(23.) See, e.g., McCaffery, Taxing Women, at 134.

(24.) Israeli Tax News 2008, online: WorldWide-Tax:

(25.) Gustafsson and Bruyn-Hundt, 'Incentives for Women,' at 32-33; Jeon (2007); see also Callan et al., Cross-Country Study; Donoghue and Sutherland, 'Accounting for the family'; OECD (Organization for Economic Co-Operation and Development), The OECD Jobs Study: Evidence and Explanations (Part II) (Paris: OECD, 1994).

(28.) Brender at 22.

(29.) Gustafsson and Bruyn-Hundt, 'Incentives for Women,' at 32-33; Jeon (2007).

(30.) Callan et al., Cross-Country Study; Donoghue and Sutherland, 'Accounting for the family'; OECD (Organization for Economic Co-Operation and Development), The OECD Jobs Study: Evidence and Explanations (Part II) (Paris: OECD, 1994).

(31.) O'Donoghue and Sutherland, 'Accounting for the family,' at 574 and table 9, at 579.

(32.) Lahey, Tax/Benefit Unit, at 28; O'Donoghue and Sutherland, 'Accounting for the family,' at 579.

(33.) Bruce D. Meyer and Dan T. Rosenbaum, Welfare, the Earned Income Tax Credit, and the Labor Supply of Single Mothers (Cambridge, MA: National Bureau of Economic Research, 1999) (working paper 7363).

(34.) The Law for Increasing the Rate of Participation in the Labor Force and Reducing Social Gaps (Earned Income Tax Credit), enacted December 2007, amended August 2008; see Bank of Israel Research Department, Recent Economic Developments (2008) 122, 21, n. 3.

(35.) Adi Brender and Michel Strawczynski, 'Earned Income Tax Credit in Israel: Designing the System to Reflect the Characteristics of Labor Supply and Poverty' Israel Economic Review (2006) 3:1, 27-61, at 55.

(36.) L. Zelenak, 'Marriage and the Income Tax,' Southern California Law Review 67, 339.

(37.) McCaffery, Taxing Women.

(38.) Colette Fagan and Gail Hebson, '"Making Work Pay" Debates from a Gender Perspective: Co-ordinators' Synthesis Report' in Babies and Bosses--Reconciling Work and Family Life (Paris: OECD, 2007), at 68.

(39.) Ruth Lister, 'Women, Economic Dependency and Citizenship' Journal of Social Policy 19:4, 445-467, at 463.

Prof. Kathleen Lahey, Faculty of Law, Queen's University, Kingston, Ontario
Table 1
Income tax table, annual earned income, 2008

Taxable income bracket Total tax on income in Tax rate on income in
 bracket bracket

From NIS To NIS NIS Percent

-0- 52,680 5,268 10

52,681 93,720 11,834 16

93,721 140,640 24,033 26

140,641 202,080 44,308 33

202,081 435,120 125,872 35

435,121 No limit No limit 47

Source: Somekh Chaikin, KPMG (Israel).

Table 2
Gross average annual incomes from wages, by occupation and sex, 2003

Occupation Men Women Women's wages
 as % of men's

Unskilled workers 50,448 32,124 64%

Agents, sales representatives, 72,408 38,472 53%
and service workers

Industry, construction, and 75,480 46,980 62%
other skilled workers

Clerical workers 90,888 61,644 68%

Professions and technical 107,820 68,628 64%

Managers 200,868 125,004 62%

Source: Euromed, Analysis of the Economic Situation of Women in Israel
(EU, 2008), table 13, at 32, based on Israel Central Bureal of
Statistics, Income Survey, 2003.
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