The second income: Are parents helping their family or the tax man?

Acorn Staff Writer


According to public opinion polls, most two-income families believe that the second income (which is usually from the wife’s job) is necessary to make ends meet.


But according to Edward McCaffery, a tax law professor at the University of Southern California and California Institute of Technology, they may be kidding themselves.


Public Agenda, a nonprofit research organization, has identified an increase in two-income families among three major trends affecting the American family over the past 50 years (along with a rise in teen pregnancy and an increased divorce rate).


But the two-income family has seen the most dramatic change since 1948 when only 11 percent of married women with children under the age of 6 worked outside the home.


Today more than 60 percent of married women with young children work outside the home and 39 percent work full time.


McCaffery wrote "Taxing Women" and has challenged two-income families to take a closer look at the taxes they pay.


He believes the U.S. tax system is the product of the 1930s and 1940s, when the single-earner model was the norm for families.


Pollings show ambivalence about mothers working outside the home, with nearly seven in 10 Americans saying it would be better if mothers stayed at home with their young children.


But 66 percent of men and 75 percent of women say a woman can be both successful at work and a good mother.


McCaffery is currently advising several members of Congress and would like to eliminate the "marriage tax."


He believes that current tax codes are stacked against women and has encouraged his readers to "educate themselves about the deep social implications of tax policy."


In his book, McCaffery begins with two real-world stories; one of a woman who discovered that her $18,000 a year job was in fact losing money for the family and the other of a woman who discovered that her $35,000 a year job was bringing home very little.


Both left their jobs, and the book explains the rationale behind the decision for each.


In a recent interview with The Acorn, McCaffery gave an example of the marriage tax penalty at work. Assuming the husband makes an annual salary of $60,000 and the wife’s job brings in another $30,000, according to McCaffery’s rough calculations, the wife’s salary is taxed at the same rate as her husband’s, leaving her with about $18,000.


Deduct $200 a week for childcare and additional expenses such as dry cleaning, household help, transportation and meals out, and the second job only adds $5,000 to $8,000 in income.


"The economics of it are that it makes more sense for the husband to get a raise and the wife might want to stay home," McCaffery said.


There are three issues in the current tax laws that bother McCaffery.


"First of all, it’s the government coercing people to do something. It’s favoring a structure that is the minority, and third, it’s saying that the man should over-work, take another job or get a promotion," he said.


Just recently, House Republicans failed to override President Bill Clinton’s veto of the marriage-penalty bill.


With a vote of 270 to 158 in favor of overriding Clinton’s veto, the House fell short of the two-thirds vote needed to override Clinton’s veto.


McCaffery said that Clinton has a proposal to fix the marriage tax and Gore is also in favor of getting rid of the marriage penalty.


"Everybody agrees that we should do something but because we can’t agree on what exactly should be done, nothing is going to be done," he said.


McCaffery would like to see a marriage bonus for one-income families that would reduce taxes and an elimination of the marriage penalty for two-income families.


"If you take current tax law as a fact, the best planning advice I can give is don’t marry, don’t have kids, don’t work if you’re married with kids. That’s what the law is telling you to do," McCaffery said.


He said this is a time of consciousness raising.


"I want people to start talking about it and learning from it. But you have to be patient. It took a long time to build these biases into the laws and it will take a long time to change them," he said.





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