Should women be taxed at a lower rate than men?

A fascinating article by economics writer John Garnaut in the Sydney Morning Herald today argues that women should be taxed at lower rates than men.

The reason is that women are more responsive to tax rates than men. If we assume that markets generally work pretty efficiently to allocate goods and services to where they are most useful and valued, then ‘good’ taxes are those that distort market outcomes the least (and those which compensate for market failures and actually help markets operate more efficiently). We should tax things in a way that minimises the extent to which people change their behaviour as a result of the tax.

One of the criticisms of high income tax rates is that it can change people’s behaviour in that it becomes less rewarding to go and work and produce socially useful things. But if, as Garnaut suggests, men tend to go off to work without much regard to the tax rate, whereas women’s decisions on how much to work depend more on the financial rewards, then you can afford to tax men more than women. A 10% increase on income tax that women pay will reduce their incentives to work substantially more than a 10% increase on income tax for men.

Garnaut refers to a study by economists Alberto Alesina, of Harvard University, and Andrea Ichino, of the University of Bologna, which finds that the "optimal" tax rate is much lower for women than for men. It varies from country to country because of different participation rates and cultural factors, but they suggest that women should be taxed at between 60-90% of the rate for men.

[Alesina] and Ichino argue governments could get away with reducing the female tax rate by a lot, and increasing the male rate by only a little, without affecting the budget bottom line, because taxpaying women would storm into the labour force but taxpaying men would be reluctant to retire. Governments would reduce the amount of tax-driven distortion in the economy per unit of revenue.

Another interesting aspect of this argument is that it would have other benefits too:

Men would spend a little more time with their kids. Women would improve their bargaining power within the home.

It would help overcome all kinds of gender discrimination in the workplace, as women would be prepared to work for lower pre-tax wages (because they would still receive more after-tax pay). It would help compensate women for bearing the brunt of maternity and child-rearing.

"From an employer point of view it would then become cheaper to hire women, therefore favouring women employment and their promotion to higher paid jobs," they say.

What an interesting idea. What do you think?