Family Income

Dalton Conley of NYU writes in Sunday's Washington Post about family income inequality. In reaction to the Lilly Ledbetter Act, he notes how women working, professionals marrying professionals and the lack of a "family wage" have put some families at the top of the economic ladder while others struggle for decent shelter. He argues that we must do something. He is correct - although not specific.

As I have said in this space previously, as long as professional women expect their professional husbands to keep working, they are at a disadvantage - as men have testosterone which causes them to strive to be top dog at work. If women want those jobs, they need to allow their husbands to become full time child rearers and happily pay greens fees when the kids are in school. With less male competition, women are more likely to get that promotion.

The idea of a family wage needs to come back - and it needs to extend to everyone, regardless of their "base wage" or productivity - which means it must be subsidized by the tax code. The responsibility of filing most taxes should rest with the employer (who actually writes the check anyway - they pay taxes and workers get a rebate each year). Corporate Income Tax can be expanded to Business Income Taxes - covering all forms of ownership. Wages can also be made taxable for the Business Income Tax, with a much higher floor for personal income taxes, which should in essence become a high income surtax of 3% (for the current 28% bracket) to 15% (for the restored 39.6% bracket). All the usual credits (child care, EITC, college savings, Child Tax Credit, the mortgage deduction, health care and insurance) would be against the BIT and be paid either to the employee or to the employer if they are providing the relevant service (like comprehensive health insurance or a no-interest mortgage). Non-retirement payroll taxes would also be merged into the B.I.T., with optional credits for offering superior retiree health coverage, severance and disability rather than having the government do it.

This tool could greatly increase equality, given the political will to raise the dependent credit to living wage levels (like $500 per month per dependent - including dependent spouses). It would in essence be a hidden Value Added Tax and may be used with a visible VAT to give the illusion that everyone shares in the duty to pay taxes. With a VAT, the BIT could be set to a rate where it mostly distributes tax and social insurance benefits, although some firms with fewer dependents or retirees may pay some net tax, while others would keep a portion of the VAT proceeds if they have more social obligations.