The Hamilton Project

Giving Secondary Earners a Tax Break: A Proposal to Help Low- and Middle-Income Families

The current structure of the tax and transfer system in the United States makes it particularly challenging for low-income married couples with children to work their way into the middle class. Specifically, the tax and transfer system has an inherent secondary- earner penalty that discourages work efforts and reduces the return to work for a second earner within a married couple. When children are present, a spouse’s work efforts often brings associated child-care costs, making the return to work even lower. Our estimates suggest that under the current federal tax and transfer system, and assuming standard child-care costs, a family headed by a primary earner making $25,000 a year will take home less than 30 percent of a spouse’s earnings. We propose a secondary- earner deduction for low- to moderate-income families. This incremental modification to the tax code would increase disposable income for affected families.

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