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The Income Splitting Method: Is it Good for Both Marriage Partners?

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  • Matthias Wrede

Abstract

This paper analyzes how deviating from individual taxation affects married couples. The focus is on time allocation, on investment in family-specific human capital and on distribution of income within the family. Two insights are discussed in detail. First, the distribution of tax-reduction gains due to the income splitting system depends on whether the family has been started or not. After marriage, joint taxation increases redistribution among family members. Second, although joint taxation reduces the tax burden of the family, it might harm the marriage partner that is more productive in household production provided that potential marriage partners foresee the effects of joint filing on the time allocation within the family. Copyright Verein für Socialpolitik and Blackwell Publishing Ltd. 2003.

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Article provided by Verein für Socialpolitik in its journal German Economic Review.

Volume (Year): 4 (2003)
Issue (Month): 2 (05)
Pages: 203-216

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Handle: RePEc:bla:germec:v:4:y:2003:i:2:p:203-216

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Cited by:
  1. Hans Fehr & Manuel Kallweit & Fabian Kindermann, 2009. "Marital Risk, Family Insurance, and Public Policy," SOEPpapers on Multidisciplinary Panel Data Research 226, DIW Berlin, The German Socio-Economic Panel (SOEP).
  2. Viktor Steiner & Katharina Wrohlich, 2006. "Introducing Family Tax Splitting in Germany: How Would It Affect the Income Distribution and Work Incentives," Discussion Papers of DIW Berlin 612, DIW Berlin, German Institute for Economic Research.
  3. Gugl, Elisabeth & Leroux, Justin, 2011. "Share the gain, share the pain? Almost transferable utility, changes in production possibilities, and bargaining solutions," Mathematical Social Sciences, Elsevier, vol. 62(3), pages 133-143.
  4. El Lahga, AbdelRahmen & Moreau, Nicolas, 2007. "The Effects of Marriage on Couples’ Allocation of Time Between Market and Non-Market Hours," IZA Discussion Papers 2619, Institute for the Study of Labor (IZA).
  5. Viktor Steiner & Katharina Wrohlich, 2007. "Introducing Family Tax Splitting in Germany: How Would It Affect the Income Distribution, Work Incentives and Household Welfare?," SOEPpapers on Multidisciplinary Panel Data Research 44, DIW Berlin, The German Socio-Economic Panel (SOEP).

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