The tax penalty on married women hiding in plain sight

Every spring, millions of American married couples engage in a little-discussed administrative duty: filing joint taxes. Originating in 1948 when married women rarely worked outside the home, this seemingly innocuous tax policy has evolved into one of America’s most overlooked barriers to gender equality.

The gender gap in America’s labor market is driven by more than just workplace discrimination and weak family policies. The tax code itself plays a surprisingly powerful role by subjecting the lower earner in a marriage (typically the wives) to higher rates. Research shows that this tax policy, known as joint filing, discourages wives from working exactly when their careers are taking off — affecting everything from their mid-career promotions to long-term retirement savings. And with more women holding down jobs than ever before, more women face the penalties of joint filing than ever before, too.

Though this system can support marriages where one partner provides unpaid care or needs more flexibility, the practice is hard to justify when over 40 percent of marriages end in divorce, when research shows it holds women back from working, and when virtually every other developed nation has moved on. A complete overhaul of joint filing would hike taxes for most married couples — setting up daunting and likely insurmountable politics, at least in the near term. A set of narrower reforms, however, seem possible.

In the early 20th century, most states followed English common law, where a married man’s income was considered solely his. However, a few states followed so-called community property laws — recognizing marital income as jointly owned by both spouses. In 1930, the Supreme Court upheld the right of couples in community property states to file joint taxes, a practice which allowed them to pay the government less money overall. Then, in 1948, Congress extended this joint filing system to all married couples, standardizing the practice nationwide.

In a mid-20th century world where most married women were stay-at-home wives, the main effect of this change was to provide tax relief to these more traditional families. Breadwinner husbands were able to split their incomes with their non-working spouses, and pay less tax. But the newly established system included a built-in penalty for secondary earners that would become increasingly problematic as more women sought to join the workforce.

Here’s how the joint filing trap works: Under our tax system, higher incomes face higher marginal rates, meaning a couple’s combined income can push them into a higher tax bracket than if they filed separately. A married woman’s earnings, assuming she earns less than her husband, is taxed at the higher rate determined by her husband’s income. Joint filing essentially “stacks” her earnings on top of his for tax purposes.

To give a more concrete, albeit simplified, example: let’s say a woman, Kate, who earns $100,000, marries Jack, who earns $200,000, and they decide to file jointly. Together, their combined income of $300,000 would fall into the 24 percent tax bracket for joint filers. If Kate had filed individually, she would have been taxed in the 22 percent tax bracket, while Jack’s $200,000 would push him into the 32 percent bracket. Put simply, Kate’s earnings are taxed more when she jointly files with Jack.

Though married couples in the US have the option of filing separately, fewer than 7 percent actually do, as that almost always subjects their household to higher taxes than joint filing, in addition to causing them to lose other benefits. In this scenario, Kate and Jack’s take-home pay would be roughly $5,000 more if filed jointly than if they went with “married filing separately.”

These tax dynamics shape women’s behavior. Early in their careers, married young women often decide it makes more sense to quit working or go part-time, so their family can save on child care and pay less in tax.

Recent economic research has concluded that eliminating joint filing in the US would significantly increase married women’s workforce participation throughout their whole life.

“While the effects of joint taxation are most acute in early and mid-career, their cumulative impact shapes women’s lifetime economic trajectories,” Mariacristina De Nardi, an economist at the University of Minnesota, told Vox. She found it “striking” how the effects of joint filing persisted across different age groups, and despite women’s increasing educational attainment and aspirations, “continue to counteract broader societal progress” today.

America stands increasingly alone in maintaining this system. In the decades after World War II, most countries copied America’s joint filing approach, but by the 1970s and 1980s — both to advance gender equality and to boost overall employment — nearly all OECD countries reverted back to individual tax filing systems.

The empirical evidence from these reforms is remarkable: Sweden, which abandoned its joint filing system in 1971, saw significant increases in married women’s employment, as did Canada, which shifted to individual taxation in 1988. In a telling contrast, when the Czech Republic bucked the international trend and introduced joint taxation in 2005, the number of married women in the workforce went down.

Could we fix this in the US?

Joint filing was meant to support men in traditional marriages, which consisted of a male breadwinner and his stay-at-home wife. Given that labor market discrimination in the 20th century kept Black men’s wages low, most Black wives could not afford to stay at home.

“The joint return was never about helping women — it was about helping white guys pay less in taxes,” said Dorothy Brown, a tax law professor at Georgetown University.

Defenders of joint filing argue the model supports “household specialization” by enabling one partner to focus on valuable unpaid work like caregiving. But this argument looks increasingly thin in an era of longer lifespans, more dual-earner households, and high divorce rates. In 2012, the US Government Accountability Office released a study showing that a divorced woman’s income plummets by an average of 41 percent after a divorce, almost twice the decline that men experience. Academic research published in 2020 similarly found that wives who divorce after age 50 see a 45 percent decline on average in their standard of living, compared to a 21 percent drop for husbands.

The path to reforming joint filing in the US faces unique challenges. Today, any complete elimination of the practice would likely be politically dead in the water.

In the 1990s, when federal lawmakers proposed an optional individual tax filing system for married couples — which is not the same as the “married filing separately” option — conservative groups rallied hard against it. Activists argued it would create a “homemaker penalty” while undermining the institution of marriage by disincentivizing wedlock. Filing individually would qualify individuals for benefits and tax deductions they could not access either filing jointly or “married filing separately,” but the proposal failed, leaving married couples with only those two options.

University of Southern California Law professor Edward McCaffery, the author of a 1997 book on joint filing, said the political backlash to this proposal was revealing, as that legislation had already been a concession to social conservatives because it wasn’t aiming to completely eliminate joint taxation. “When Phyllis Schlafly and the Liberty Foundation came out against it, it was dead on arrival,” McCaffery told Vox. “It became clear it wouldn’t be enough to just not hurt traditional families, you’d have to give them some special goodies, too.”

The US system is particularly entrenched because health care and retirement systems have evolved for decades around joint family benefits. Married couples who file jointly, for example, typically qualify for lower health insurance premiums and more comprehensive coverage than those who file separately. Similarly, filing jointly gives married couples greater access to their spouse’s Social Security benefits.

Past decisions around work and family — including career gaps that erode skills and networks — have also created sticky “lock-in” effects that would be difficult for millions of couples to reverse, even if Congress abandoned joint filing tomorrow.

Still, more targeted reforms might work. During the Reagan administration, Congress briefly implemented a tax deduction for secondary earners, essentially reducing the tax penalty on wives by allowing couples to deduct 10 percent of the lower-earning spouse’s income, up to $3,000. Some economists have proposed bringing this idea back.

Michael Graetz, a tax professor emeritus at Columbia and Yale law schools, advocates both reinstating the secondary earner deduction and expanding child care subsidies. These changes would help protect secondary earners at a crucial career juncture, when child-rearing responsibilities often force women to reduce their working hours for financial reasons.

Tax policy might not be the first thing on the agenda for most feminist activists, but the case for rethinking joint filing is strong. As De Nardi’s research demonstrates, joint filing still poses a major barrier to women’s participation in the workforce, even for younger and more educated women.

“Over time, political inertia and the complexity of reforming entrenched tax systems have likely contributed to its persistence,” she said. “Policymakers and the public may also underestimate the long-term costs.”