Gender tax difference in the U.S. income tax

Unmarried women face a significantly lower average federal income tax rate than unmarried men, 6.3% versus 10.9%. Some of the difference arises because women have lower income on average and the tax system is progressive. Using a non-parametric decomposition analysis, we show that tax progressivity accounts for less than 60% of the gender tax rate difference, leaving the rest being explained by gender differences within income classes. This conclusion remains when the decomposition exercise uses an equivalence-scale-adjusted income and considers gender differences in nontaxable income and time use. Regression results reveal that much of the gender tax difference arises because unmarried women are more likely to live with dependents, making them more likely to claim child-related tax benefits relative to unmarried men. Our findings indicate that the current tax system places a high value of raising children beyond the consideration of the families’ larger consumption needs. Because our analysis does not consider the higher risk of economic insecurity facing single parents and the various externalities generated by women’s higher commitment to childcare, future research should focus on determining whether these additional considerations could justify the extent of the gender tax differential.