What Is The Pink Tax And Its Impact On Consumers?

In 2015, a study from the New York City Department of Consumer Affairs (DCA) found that, on average, products for women cost about 7% more than similar products for men. This finding is related to something called “the pink tax,” where items designed for women are more expensive than the same items intended for men. Pink taxation can affect many areas from personal care items to children’s toys and even dry cleaning. It can also cost women thousands of additional dollars per year.

Read on to learn how the pink tax works, the current laws banning it and how you can avoid it.

What Is The Pink Tax?

The pink tax isn’t an actual government tax. Rather, it refers to inflated prices on goods and services that are marketed to women alongside similar, lower-cost options for men.

The debate surrounding the pink tax is complicated, but the essential question is this: Are women simply willing to pay more, or are they forced to? And is that fair?

Critics of the pink tax argue that it’s pricing discrimination, and that it should be fought against. They believe that businesses are putting an unfair burden on women by forcing them to pay higher prices. The other side points out that some of these pricing differences result from the free market. An item’s price depends on the cost of making it, so if it costs more to produce some women’s products, the higher prices make sense. They also argue that higher prices can reflect consumer demand.

Critics respond to this argument by pointing out that brands and retailers make it difficult to avoid these prices, especially when there are social costs to not following gender norms. The latter group argues that this is still a reflection of individual choice.

History Of The Pink Tax

One of the earliest attempts to combat the pink tax came from California in the mid-’90s. In 1994, the California Assembly Office of Research issued a report stating that 64% of businesses in five major cities were charging more to wash and clean a woman’s shirt than a man’s. This, among other findings in the report, led to California passing the Gender Tax Repeal of 1995. The new law was aimed at regulating services like haircuts and dry cleaning, instead of products, and required businesses to charge the same price for a service, regardless of the customer’s gender – if it took the same time, cost and skills to produce. In 1998, New York City’s then-mayor signed a similar bill. It also allowed the New York City DCA to collect fines from businesses who broke this rule.

There have also been several attempts to federally repeal the pink tax in Congress. This bill, aptly named the Pink Tax Repeal Act, aimed to “prohibit manufacturers or service providers from selling substantially similar products at different prices based on the gender of the intended purchaser.” It would have also given the Federal Trade Commission (FTC) and state attorneys general the authority to enforce these requirements. Though the bill was introduced in 2016, and has been reintroduced several times since, it has not passed.

Current Laws On Pink Taxation

Currently, the states of New York and California, as well as Miami-Dade county in Florida have laws banning the pink tax.

In New York, the current law mandates that “substantially similar” goods can’t be priced differently based on the gender of the intended consumer. This means that two items with comparable materials, features, intended use, and design that are made by the same brand should be the same price. For example, if a business made a blue scooter and a pink scooter with the same materials, design and features, the two products should cost the same amount.

In 2023, California implemented a similar law banning the pink tax. This ban, much like its New York counterpart, also prevents “substantially similar” goods and services from being different prices based on the gender of the consumer. It also only allows pricing differences if there are significant variations in the cost or time required to produce a good.

Miami-Dade county in Florida also has a law banning the pink tax, where businesses can only charge more if a good requires more time, difficulty or cost to produce.

Seeing these laws, a person may be tempted to ask if the pink tax is still a thing The answer is yes. In fact, several more states have recently introduced their own bills to fight it, namely Hawaii, Illinois, New Jersey and Washington.

How Does The Pink Tax Work?

Even though two products may seem “substantially similar” there can be legitimate reasons why a good or service for women could be priced differently:

• Tariffs: Some tariffs on imported goods vary based whether the product is made for women or men. For example, clothing imports for women are taxed higher than those for men, the cost of which can be passed onto consumers and can lead to higher prices.
• Marketing costs: Some brands try to make their product more appealing to women by altering the packaging or spending money on advertisements. But by doing so, the item can become more expensive to make, which raises its price.
• Retailers: In some cases, it’s not the manufacturers of a product who are charging more, but potentially a third-party seller, who notices that shoppers are willing to buy a more expensive product. A seller may also collude with another brand to keep their price low and raise the prices of competing brands.
• Price discrimination: Price discrimination takes place when people are charged different amounts for the same good or service. Sellers may lower a price or offer discounts to incentivize people to buy their product, like with student or senior discounts. In this case, if sellers see that women are willing to pay more for a good or service targeted towards them, they may increase the price of that service.
• Uncompetitive markets: In some industries, there is a small selection of companies that controls the products being released. This means there is not a lot of competition in the market to keep prices low.

Pink Tax Examples

You’ve probably interacted with the pink tax, as there are many different products and services impacted by it, including:

• Razors and razor cartridges
• Shaving cream
• Deodorant
• Shampoo and conditioner
• Body wash and soap
• Lotion
• Clothing
• Dry cleaning
• Haircuts
• Toys and accessories

Below are some of the items profiled in the 2015 New York City DCA study “From Cradle to Cane: The Cost of Being a Female Consumer” and how their prices change based on the intended gender of the consumer:

*Data taken from 2015 NYC DCA Consumer Report “From Cradle to Cane: The Cost of Being a Female Consumer”

The Pink Tax And Women’s Empowerment

Women face obstacles as consumers in addition to the pink tax. While there has been some progress on the gender pay gap, it was estimated that, as of 2022, women still only made 82% of what men made. This results in women having to spend a larger portion of their income than men on goods and services that cost more, doubling the economic burden.

While these challenges to women’s economic empowerment might seem daunting, there are ways to circumvent the pink tax, including:

• Buying gender-neutral items: One of the best pink tax solutions is to skip the products that are the most impacted. Many gender-neutral items like razors, shaving cream and soap are identical to the alternatives targeted at women and they may be more budget friendly. Though some of these options may have different packaging and might not have the same scents, they likely work just as well as products marketed toward women.
• Shop around in advance: If you have the time and ability, visiting different businesses to see their prices can be a great way to circumvent the pink tax and ensure that you’re getting the best deal.
• Choose the generic brand: Sometimes, name brand products can be more expensive, and choosing a similar generic version may save you money. Plus, most generic brand products work very well.
• Buy Online: Some new online companies, particularly for razors, have been able to absorb the cost of the pink tax and can offer gender neutral pricing.
• Study the ingredient list and price per ounce: Women’s products can sometimes be offered at the same price as the alternative for men, but they may have a less product in them. That’s why it’s important to check the ingredient list and the price per ounce to make sure you get your money’s worth.
• Ask for equal pricing: If you’re getting your clothes professionally cleaned and you notice a difference in the price between men’s and women’s clothes, ask if you can be charged the rate for men’s clothes. Haircuts are a little more difficult, but if you’re getting a pixie cut or a short haircut that you just need touched up, you may be able to ask for the men’s price.
• Know your rights: Miami-Dade County (Florida), New York and California all have laws against discriminatory pricing. Look up the laws in your area and see how you’re protected from the pink tax.
• Contact your representatives: If you don’t like a policy, you can always contact your representatives and let them know how you feel. You can find your elected officials here.

Pink Tax FAQs

The debate around the pink tax can feel complicated and confusing. Here are some of the most frequently asked questions surrounding the issue.

Why does the pink tax exist?

There isn’t one single reason that the pink tax exists. It exists, in part, because some women’s items are more expensive to make. For example, there might be additional costs related to importing items that get passed on to the consumer.

However, others argue that the pink tax is a systemic issue where brands and retailers consistently price women’s items higher because they think women will buy them regardless.

In short, there’s no real answer as to why it exists, other than a complicated set of economic and social factors.

How much is the pink tax?

The pink tax is not a government tax, which means it is not a set cost. However, a 2015 New York City DCA study approximated that products targeted towards women cost an average of 7% more than comparable products for men. However, this number varied based on the type of product.

How can I avoid the pink tax?

If you’re still asking yourself “how to avoid pink taxation,” remember that you can:

• Choose men’s or gender-neutral products
• Investigate the prices of services at different stores
• Use a generic brand
• Buy online and in-bulk
• Compare the price per ounce of men’s vs women’s products to make sure you’re getting your money’s worth
• Ask for equal pricing if the services are comparable

What’s the difference between the pink tax and the tampon tax?

The pink tax isn’t a government tax, instead it’s a premium that is placed on products targeted toward women. Meanwhile, the tampon tax refers to an actual tax. The tampon tax is a reference to the fact that tampons and other menstrual products are taxed as a luxury good like electronics or toys, when they are a necessity. As a result, these items become more expensive and less accessible for the people who need them.

How does the pink tax impact women?

The pink tax impacts women by encouraging them to pay more for a good or service based solely on their gender. However, the pink tax is only part of the story as the gender pay gap still economically impacts many women, as does the tampon tax. Together, these trends help illustrate how women end up needing to spend more of their money on goods and services than men, which can limit their financial opportunities.

The Bottom Line

The pink tax, where women’s products cost more than similar ones for men, is a complex issue that can impact your budget. Remember, there are ways to combat the pink tax, and doing so can expand your financial choices in the long run.

To learn more about your spending habits and see what your financial options may be, sign up for Rocket Money^SM today.