Congress's failure to tax nonmarket activities has both distributional and behavioral consequences for women. Tax commentators have traditionally focused on the distributional effects of nontaxation. Many have argued that by declining to tax the value of household labor, Congress provides valuable tax benefits to families with stay-at-home spouses. These families obtain the value of household labor tax-free, while the same labor performed in the market is subject to taxation. The tax literature has traditionally viewed this unequal treatment as violating the longstanding and firm principle of tax neutrality. Despite this perceived unfairness, tax analysts have uniformly taken the position that administrative difficulties make taxation of nonmarket household labor impossible.

Recently, feminist tax scholars have begun to examine the behavioral incentive structure of the Code. While these scholars acknowledge the distributional effects of the Code, they focus on how the tax structure discourages women from working in the waged labor force. Feminist scholars argue that by failing to tax the benefits of household labor while at the same time taxing the benefits of market labor, Congress encourages women to undertake a conventional household role that makes them dependent on a traditional wage earner and perpetuates their economic vulnerability.

THE BEHAVIORAL EFFECTS OF EXEMPTING HOUSEHOLD LABOR FROM THE TAX BASE

Although time spent in the household was once viewed primarily as leisure time, there is now little question that the labor performed in the home is productive and valuable. Indeed, economists estimate that the value of household services is equal to at least 25% of the entire gross domestic product or approximately §145.6 billion. Congress's decision to impose a tax only on market activities therefore shelters a significant portion of household income from taxation.