Taxes, Transfers, and Women’s Labor Supply in the United States

The U.S. tax and transfer system generates revenue and provides safety net programs that move millions out of poverty. Since women are more likely to live in poverty, they are more likely to qualify for means-tested transfers. The structure of taxation in the U.S. often penalizes secondary earners, who are usually women. These programs alter work incentives and consequently may affect labor supply decisions. In this chapter, we examine the empirical evidence on the effects of taxes and transfers on the labor supply of women in the U.S. We show that much has changed since 1990, with the biggest shift being a change from cash transfers via welfare to refundable tax credits to workers. Overall, the evidence we review shows women have higher labor force participation and are less responsive to changes in after-tax wages than they were before 1990, but the labor supply effects vary substantially by program considered.