I think punishing her at this point is a mistake. And, as your husband can see, his goal in punishing her is not being achieved. A rule of thumb: If it's not working, do something different!
Thank you. One question I do have is if it is a matter of will, is punishing her by taking things away positive or will it prolong the issue. We have been taking her Barbies or toys away from her and sending her to bed after dinner. I think this may be a little hard but my husband thinks that if we punish her with taking things away, she will want to go on the toilet and not in her pants.
This is clearly now a matter of will, and until she decides to use the toilet there's nothing much to do. As long as you remain supportive and patient, more can't be asked. The difficult choice to make is to decide when you should set limits on the behavior - i.e., when to say that it is not permissible any longer to refrain from using the toilet. One option is to identify an arbitrary point on the calendar (e.g., in six weeks) when you willa dopt the limit setting approach. That's a perfectly OK thing to do, as long as you don't rush into that approach.