Put yourself in the shoes of a store clerk and his family this holiday season. Say you earn $11 an hour, which is a bit less than the national average for retail salesmen. And say that’s not enough to feed, clothe and house your spouse and children to your satisfaction, so your wife decides to take a job in the same store, full time. How much of her earnings do you think will make it to your joint bank account at the end of the month?

The answer: about one-quarter, or about $3 an hour.

The rest is lost to income taxes and the increased cost of child care, and then there are the lost tax credits, food stamps and other government benefits.

That’s not much incentive for her to take the job, is it?

This, two University of Maryland economists argue in a forthcoming paper, is the difficult math for the low-wage working families barely getting by in the weak economic recovery: Their wages have fallen over the past decade; their anxiety about paying the bills has risen; and if they respond by sending a second spouse into the workforce, the returns are low.

Lower-income workers have job and income worries.

“They go to work, and it’s sort of like a treadmill,” said Melissa Kearney, one of the economists, “which is the exact opposite of what you’d do if you were trying to design a tax system to incentivize people to go to work.”

Kearney directs the Hamilton Project at the Brookings Institution. In a new paper for Hamilton, she and Lesley Turner propose changing the tax code to eliminate what they call a “secondary-earner penalty” on low-income families.

Their plan would effectively boost low-wage families’ disposable incomes by 3 percent to 4 percent a year — or about $1,200 to $1,400 for a family with total annual income of $50,000. The lower amount would come from a revenue-neutral option that pays for the tax break in the federal budget by reducing other tax credits. The higher amount would come from an option that would cut federal tax revenue by about $8 billion a year.

The benefits are targeted at a group that data show are working more hours just to stay afloat. Census statistics show that both spouses worked full time in one-third of married-couple families in 2009, double the rate from 30 years earlier. (Job losses from the recession have since pushed the percentage down slightly.) A previous Hamilton Project paper showed that the typical two-
parent family worked 26 percent more hours in 2009 than in 1975.

Unlike most developed countries, the United States lumps both spouses’ incomes together for tax purposes. That matters because marginal rates rise with income. If a wife earns $25,000 a year and her husband takes a $25,000-a-year job, the first dollar of his salary is taxed at a higher rate than the first dollar of hers. Additionally, the couple loses eligibility for government benefits and tax breaks, such as the earned-income tax credit. If they have young children, they also incur child-care costs if both spouses work full time.

Kearney and Turner tallied the costs and found that they eat away more than 70 percent of the second earner’s $25,000 salary.

To ease the pain, the economists want Congress to change the tax code for married families with children to allow the secondary earner to deduct 20 percent of his or her earnings of up to $60,000 a year. The deduction would be phased out beginning with families who earn a total of $110,000 annually.

The economists tailored the break narrowly in hopes of winning political support. Kearney said she would prefer to see everyone pay taxes on individual income, not family income. But she said this proposal addresses a particular weak spot of the economy: “We’re trying to get more disposable income into hands of struggling working families.”