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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.
Progressive taxation – taxing high-income individuals at a proportionally higher level than low-income individuals – has sparked more than a century of controversy. Those who support progressive taxation have heralded it as a policy that promotes the greatest good for the greatest number in society, protects traditional democratic values, reflects the communitarian worldview of women who see themselves as responsible for the well-being of all individuals, and reveals the “aesthetic judgment” that income inequality is “distinctly evil or unlovely.” At the same time, critics have condemned progressive income taxation as social policy that amounts to theft and involuntary servitude, reflects the democratic process gone awry, penalizes hardworking individuals, and produces economic waste throughout society. Theorists in almost every discipline have entered the progressivity debate, proposing a variety of different tax rates in order to disburse the costs of public goods and services.
Despite their contending viewpoints, theorists on both sides of the debate have reached surprising consensus on the proper treatment of the truly poor. Both sides agree that legislators and policy makers must avoid imposing tax costs on individuals living at or below subsistence levels of income. This agreement is notable in light of the widespread perception that advocates of progressivity worry about the poor while its detractors worry about the wealthy.
In fact, all tax theorists have divided society into two groups – relatively wealthy individuals who pay taxes and poor individuals who are excluded from the face of the laws entirely.
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