This transcript has been edited for clarity.

David Stewart: Welcome to the podcast. I'm David Stewart, editor in chief of Tax Notes Today International. This week: questioning neutrality.

The language of tax codes and tax systems is often expressly neutral. After all, people have to pay their taxes regardless of their gender, race, ethnicity, or any other defining characteristic, but does the language actually apply in a neutral way in the context of societal expectations, specifically those around gender? Our guest this week looks at gender-neutral tax policies and their effects.

This week's episode is part of a series we've been doing examining how tax rules affect marginalized groups. We'll include links in the show notes to our previous episodes on the intersection of tax and racial inequality, LGBTQ rights, feminism, diversity in the tax bar, tribal taxation, race-based tax weapons, and wealth and inequality.

Here to talk more about this is Tax Notes legal reporter Caitlin Mullaney. Caitlin, welcome back to the podcast.

Caitlin Mullaney: Hi, Dave. Thank you so much for having me again. I always enjoy being on the podcast.

David Stewart: Now, I understand you recently spoke with someone about this issue. Could you tell us about your guest?

Caitlin Mullaney: Yes. I recently spoke with Javiera Moraga. She is a Chilean lawyer who recently received her LLM from Cornell. Prior to her time at Cornell, she worked in Chile as an associate tax lawyer at TH Partners focusing on corporate and individual income taxation and the Chilean tax treatment of international transactions. She was even credited as a tax adviser on an Oscar-nominated documentary film last year.

David Stewart: What did you discuss?

Caitlin Mullaney: We discussed an article that Javiera recently authored, "Tax Policy: Is Gender Neutrality Enough?" The article examines how so-called gender-neutral tax systems can inadvertently perpetuate gender inequalities and proposes a more comprehensive solution.

David Stewart: All right, let's go to that interview.

Caitlin Mullaney: Javiera, first of all, welcome to the podcast.

Javiera Moraga: Thank you for having me here. I'm so excited.

Caitlin Mullaney: I'm so excited to have you here to discuss your article. Let's get right into it. Your article examines how tax systems, often deemed neutral, inadvertently perpetuate gender inequalities and proposes a shift from mere neutrality toward a comprehensive inclusion of gender perspectives and tax policy design. Do you want to give us some background on your research?

Javiera Moraga: I actually went into my email to figure out how I started to get into this topic. My first semester of my LLM at Cornell, I took a seminar called "Women in Business Law and International Trade." Before that, I worked for around three years in tax issues back in Chile, so I knew I wanted to do something related to women, gender, and taxes. I started doing my research to write a final paper for that seminar, and I came across the OECD tax policy and gender equality paper, which basically, it's a stocktake of country approaches.

I came into a statement where countries were asked if the goal of their tax policy should be to aim at gender neutrality or to go beyond gender neutrality, to consider using the tax system to compensate for existing gender distortions in society. When I came to the survey, I realized that three-quarters of the country that responded considered that the tax system should aim for gender neutrality. I'm like, "OK." It took me back a little bit because I was like, "You think you need to aim at gender neutrality but not use the tax system to compensate for any existing gender distortion?" Honestly, I think that was the starting point of my research. I was like, "Is gender neutrality enough?" That was the question. The answer is no, I don't think so.

Caitlin Mullaney: The article explains that tax systems tend to fly under the radar from gender equality analysis. What do you think the causes of this may be?

Javiera Moraga: There's a few causes. First is this perception of neutrality. Part of the article says this very famous quote that says, "In this life, nothing is certain but debt and taxes," and that makes tax system designed with the assumption that neutrality equates to fairness. Tax law generally do not mention gender. They're presumed to affect everyone equally.

This perception, I believe, that creates a barrier to recognize that tax policy might have different impacts on men and women because there's societal and economic inequalities. Because everyone thinks taxes are neutral, nobody really cares about going into gender. That's one of the reasons, but I think another important reason is that tax policy is generally and traditionally seen as a tool for economic management. It focuses on revenue generation and economic growth and market efficiency.

Gender equality, on the other hand, is often seen as a social issue. Because there's this separation between tax systems and gender social norms, people often overlook how their policies can perpetuate or exacerbate gender disparities.

Caitlin Mullaney: Can you elaborate a little on the importance of language in the tax code and the influence that may have?

Javiera Moraga: Yes. Today, tax provisions usually do not stipulate any kind of difference in the language of the tax codes or statutes that differentiate their treatment between men and women. The IRS, the revenue collection agencies, do not care if you are a child, or about your race, or your age, or whatever it is. They care about your income. That often means if you are on the same level of income, you are taxed the same.

It is not far-fetched to think that that's going to give you a gender equal result, but that's not the case. I think the importance of the language in the tax code is that it's another barrier, because again, tax systems are often designed with the assumption that neutrality — not differentiating between men and women — equals to fairness, and that's not really true.

Caitlin Mullaney: Javiera, you explained in the article that many countries have started moving away from tax systems that include the explicit biases for differential tax treatments based on gender. However, you note there may be benefits to incorporating some gender-based tax policy. Can you discuss what some of these situations may be?

Javiera Moraga: Because of how gender roles in society have been changing, the perception of what a woman and a man does in a society has have been changing over the past 20 years; usually, countries are getting away from differentiating their tax treatments between men and women. That's because it is, I don't want to sound nonacademic here, but it is very woke to say, "Oh, we're moving forward to eliminate any kind of bias between men and women."

But the thing is that, often, in many cases, gender-neutral legislations have actually made women worse off. In your own podcast here in 2021, Yvette Lind, who's the professor of tax law at the Norwegian Business School, she gives one example, which is Denmark's widow pension. What happened in Denmark is that there used to be a widow's pension, and that makes a lot of sense. If you think about it, women do live longer than men. That means that if you plan ahead, you should design a tax policy that accounts for this biological fact. Women do live longer. We're going to be here longer, and states and governments are going to have to take care of older women.

Because of this movement to eliminate any kind of difference between men and women in the tax system, they lost that widow pension and that made women worse off. Gender neutrality and eliminating any kind of language that makes a difference between women and men sounds very woke, sounds very progressive, but if you see the effects in practice of what those kind of provisions can do to a woman, actually, it makes us worse off.

Caitlin Mullaney: Thank you. You've touched a little bit on the impact that gender-neutral tax systems may have on perpetuating gender inequalities because of the reflection of societal norms. Can you elaborate a little on what this may look like?

Javiera Moraga: I think the big thing here is to know that as long as men and women have a different position in the job market, in how consumption looks between them, in how many hours do we work, what kind of jobs have we enter, the fact that women are childbearers; we are different. Men and women are different.

Because of that, even though having a neutral, in paper, tax system, the effects that that tax system is going to have, it's going to vary because of these differences in the job market, in the employment rates, in the kind of hours that we work. That makes women worse off because there's a big study.

One of the key concepts here, it's talk about implicit and explicit bias. Implicit biases are those that, they come when tax systems do not necessarily differentiate between men and women. But because women have, I don't know, we make up most of the second earners or we work jobs that are of a lower income than men, then we get worse tax consequences.

One example is men usually make more money than women in a job, generally. That means that women are overrepresented on the lower end of the income, and that means that second earners, who are mostly women, are taxed at a higher marginal rate than first earners, which are usually men. That's just a basic example of how these policies affect women in real life.

Caitlin Mullaney: Are there any countries or regions that you have found these issues to be most prevalent?

Javiera Moraga: Well, one big problem are developing economies because, this is studied before, but in developing economies, a lot of women are not on the formal job or employment market. That means that even if, let's say a lot of these developing economies decide to put a tax system that lowers the personal income rate of women, well, that would not be a solution for women who are not on the formal employment market.

That actually would not help, so that's one of the problems, that women in developing economies and countries are in the informal world or space of having a job. Because of that, they are still getting the bad effects of the tax policy without being able to have a solution by lowering the rate of the personal income tax.

Caitlin Mullaney: What would you say would be maybe an alternative that these nations may be able to do when developing tax policy that could help women that are more in an informal employment market?

Javiera Moraga: An increase in personal allowances and personal allowance that are not based on family-related factors may benefit women more because that reduces the tax burden more at the lower end of the income distribution. That's where women, we tend to be overrepresented because we make less money than men, so maybe an allowance would be a better option than just a cut on the tax rate of personal income tax.

Caitlin Mullaney: Thank you. What areas of tax policy have you found to be the most affected by these gender-neutral implicit biases that you've mentioned?

Javiera Moraga: I actually do not know this. This is just a theory, but I'm pretty sure that when it comes to consumption taxes, there is a big issue when we talk about implicit biases. That's because if you think about it, women and men do have different consumption.

We buy differently, we buy different things, we have different consumption patterns. Because of that, you can't — in theory, you can say, "Well, maybe women in a household are the ones in charge of buying household items, cleaning items, child care items, diapers, stuff like that that men usually do not buy," and that's again related to this gender stereotypes that have been present on our society for so many years. If you make that theory, that women are the ones who buy a lot of household items, then you could say, "Oh, they spend more of their income," which is already lower than men, "on things that are usually taxed on a household level."

If you have a man and a woman who live together, like me and my husband, but I am the one who usually buys the cleaning stuff, or the household items, or the decorations, or the diapers for the kids, I'm going to be spending more of my salary, which I already make less than my husband, on things that are for the household as a whole. That, I think, it's where things get tricky because it's really hard to study consumption patterns within a household. But if you make that assumption, OK, we're going to say that women buy those kinds of things more often than men, then women are worse off.

Caitlin Mullaney: You've mentioned both the higher impact of consumption taxes that may be affecting women and also as this theoretical second earners in a two-income household. They're already at a worse off point as far as the gender-neutral tax policies so, in theory, they could be getting hit both times by the same policies?

Javiera Moraga: What I'm trying to say is that there's two ways to look at it. One of it is, which is studied, this is a conclusion that is consistent that says that second earners face at disproportionately higher tax burden than a single individual at the same earning level. If you have a couple where the woman is the second earner, she makes less money than her husband because she works less hours because she has to take care of the kids, that means that, on average, a second earner takes home 60 percent of their income and a person who is single in the same situation will take 7 percentage points more, so 67 of their earning home. That's one problem.

But then when you combine that with consumption patterns, that 60 percent that a woman is taking home or that a second earner that is usually a woman is taking home, she's going to spend that more on things that are for the household, like things for the child, like cleaning supplies that men usually do not buy. That's the part that is not studied.

The part that is not studied enough is the consumption patterns to just say, "OK, a woman does buy more often things that are for the household as a whole." You already have the burden of being a second earner, and from that, 60 percent that you're taking home, you're spending more of your paycheck on things that are for the whole household than a man.

Caitlin Mullaney: That's very interesting. It definitely seems like there's still a window there for a lot of further research on this topic.

Javiera Moraga: Yeah, it's really hard. One of the problems of going into consumption taxes, such as VAT, is that the decisions, buying decisions, what do you buy, vary a lot from household to household, and they're made in the household.

I'm just making a theory here that women are usually the ones that say, "Oh, we're missing shampoo, we're missing cleaning supplies, we're missing diapers," and maybe a man wouldn't notice, but maybe they would. But if you think about the position of a woman in a society where usually she's considered to be the caretaker of the home, you might make the assumption that they make those buys and not the men.

Caitlin Mullaney: Thank you so much for going into that and elaborating. Just to close it up: Moving forward, what would be some alternative solutions to simply adopting a blanket gender-neutral stance for countries wanting to address these inequities through their tax policy?

Javiera Moraga: One of the big issues that today we have is, again, we don't have enough data. I think the first step that countries should take is just figure out how to get this data, this disaggregated data that will help to make those analyses for their tax policy.

Second, and I think this goes back to the first thing that make me start this research, is that countries today, at least 75 percent of the countries that were interviewed by the OECD in their article, thought that the goal was gender neutrality. I just want to make an invitation to those governments to rethink: Is the goal gender neutrality, or can we use tax policy as an instrument to favor gender equality, to give back to women who have been disadvantaged for years? It could be very, very useful to use tax policy that way.
I think another and a last point that I want to make is that explicit biases, so making a distinction between the tax treatment on the tax treatment between men and women could sound crazy. In a world that is moving towards equality, making a distinction between men and women today and how they're treated in their taxes sounds crazy but might be the solution.

There's actually good reasons to make distinctions starting because women live longer than men. In 20 years, the population is going to be overrepresented of women in older stages of life, so why don't we start planning ahead? Maybe don't think that explicit biases are off the table. Maybe, if they're well designed, they could be the solution.

Caitlin Mullaney: Well, thank you so much for explaining all of that with us today. It's definitely a topic I'll be looking forward to seeing any future research. Is there anything else you would like to add?

Javiera Moraga: Just thank you for having this space. I think these are topics that are, again, not explored a lot. I'm not an expert on gender at all. I'm just a woman that works on taxes, so this might be very self-centered when I'm just doing this research and thinking, "Oh, yeah. I do the cleaning, buying in my house, or I feel that sometimes second earners get taxed more highly than others," but I just want to invite everyone to do this research and want to thank you for having this space and just sharing these kind of topics that are so important.

Caitlin Mullaney: Thank you so much for speaking with us today. Sadly, that's all the time we have. Again, I want to refer any interested people to Javiera's article. It's titled "Tax Policy: Is Gender Neutrality Enough?"

Javiera Moraga: Thank you.

David Stewart: Now, coming attractions. Each week we highlight new and interesting commentary in our magazines. Joining me now is Acquisitions and Engagement Editor in Chief Paige Jones. Paige, what do we have for us?

Paige Jones: Thanks, Dave. In Tax Notes Federal, three Baker McKenzie partners argue that Treasury and the IRS have exceeded their authority for partnership guidance. Eight tax professionals analyzed the logic of Moore and argue that the decision undercuts attempts to sharply limit Congress's taxing power.

In Tax Notes State, Dario Arezzo examines New York farmers' investment tax credit refunds. Darien Shanske argues that the Pennsylvania Supreme Court made the correct ruling in Zilka.

In Tax Notes International, four Flick Gocke Schaumburg practitioners analyze recent German tax court case law regarding rules on relocation of functions. Rosario Cosentini explains the main features of an effective tax control framework according to the Italian legal system.

Finally, in featured analysis, Ryan Finley explains why Coca-Cola's forthcoming appeal of a Tax Court decision will likely be an uphill battle.

David Stewart: That's it for this week. You can follow me online, @TaxStew, that's S-T-E-W, and be sure to follow @TaxNotes for all things tax. If you have any comments, questions, or suggestions for a future episode, you can email us at podcast@taxanalysts.org. As always, if you like what we're doing here, please leave a rating or review wherever you download this podcast. We'll be back next week with another episode of Tax Notes Talk. 

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