Monday, May 08, 2006

Taxing working mothers

One of the oldest arguments for child-care subsidies is that the imputed value of the work provided by mothers within households is untaxed so working mothers should be given a break using childcare subsidies. Now the argument has resurfaced in a different guise in a paper by Patricia Apps, Family Taxation: An unfair and inefficient system. The paper is reviewed by John Head in the Australian Financial Review today (subscription required) . Head supports App's views.

The gist of the argument is that the family tax benefit effectively amounts to taxing total family income rather than individual income. To Apps this means working women are unfairly overtaxed. As a consequence their workforce participation rate is only 75% that of men and their hours worked only 50% of male hours for those under 65. The Apps-Head target is to get far more women working and for far longer hours. Getting more women into the workforce, to Head, would 'draw heavily on the reserve army of unemployed women'. Indeed the present tax and welfare system is savagely discriminatory against working mothers and threatens economic disaster for the country'. (my bolding, phew!)

I disagree with Apps and with Head and think John Howard's family-based tax policies are essentially sound because they are pro-children. Apps and Head assume that children are best brought up in paid child-care rather than by one of the parents. This is why they favour taxing individual incomes and heavily subsidising child-care. The policy of taxing joint family income provides incentives for couples to take care of their own children and this is a sound idea. The parent who works need not be the male but at least one parent remains at home for much of the time to bring up young children.

Moreover, I cannot see that it is reasonable to associate welfare gains with having everyone in the workforce and assigning all child-care duties to paid professionals. This is placing too much emphasis on our economic functions as producers and insufficient emphasis on our role as child-raisers. Its a backward way of looking at families that has been fostered by bigoted feminism and which demeans the role of families and parenting.

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