Progressivity, Taxing for Growth, and Gender Differences in Tax Payment Patterns and Post-Tax Income

Gender difference in taxation is generally understudied. However, existing scholarship, largely country case studies, suggests men pay higher tax rates where income tax progressivity is higher, due to their higher average income. Men’s higher rates should then increase gender equality in income post-tax, meaning progressive taxation can be gender equalizing. However, many rich countries (including over half of the high income countries included in this study) reduced income tax progressivity starting in the 1980s-90s during “taxing for economic growth” reforms. These changes have previously unexplored implications for the extent to which the current (versus past) tax systems of rich countries reduce, leave unaffected, or compound gender disparities in pre-tax income. Further, some literature suggests that the use of less progressive taxation might be preferable to support more generous and stable social welfare systems (Steinmo 1993; Wilensky 2002; Kato 2003; Lindert, 2004). However, we know little about whether or not changes in transfers from potentially more generous or stable welfare states compensated for any gendered effects related to tax progressivity reductions. This paper examines 1) how changes in levels of tax progressivity over time were associated with shifts in gender differences in tax rates and post-tax income and 2) whether the contribution of taxes to increasing gender income ratios (pre-to-post-tax) decreased where progressivity reduced, 3) whether transfers compensated for any reduction in this gender-equalizing role of taxes. Throughout, the primary data source is the Luxembourg Income Study (LIS) database, which I used to create an unbalanced panel of pooled country/year observations from 27 high income countries (total of 351 observations from 3-43 years per country). Using fixed effects regressions and a novel contribution analysis, I find that reductions in tax progressivity are associated with increases in women’s tax rates relative to men’s rates, as well as smaller post-tax-post-transfer gender income ratios (net of pre-tax gender income ratios). Similarly, tax payment contributed less to increasing gender income ratios (sometimes even yielding smaller ratios) in most countries where tax progressivity reduced over time. Transfers only compensated for the reduced contribution of taxes (meaning the combined gender equalizing effect of taxes and transfers remained the same or greater over time) in a third of the countries with tax progressivity reductions. Based on this evidence, progressivity changes have reduced the gender equalizing potential of the tax systems of a number of study countries, without consistent compensation from transfers. These findings raise concerns that growth-oriented tax policy decisions may be problematic from a gender equity lens. In examining changes in the distribution of burdens (tax payment) and benefits (transfers) between men and women and how they relate to tax progressivity, this research fills a gap in the literature on gender differences in taxation and generates a fuller understanding how tax policy changes can have gendered outcomes.