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Shacking Up or Shelling Out: Income Taxes, Marriage, and Cohabitation

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  • James Alm

    ()

  • Leslie Whittington

Abstract

Anecdotal evidence suggests that the income tax penalty associated with marriage contributes to the decision of a couple to live together as a married vs. a cohabiting couple. In this paper, we use household data from the Panel Study on Income Dynamics to estimate the impact of various factors, including the federal individual income tax, on a couple's decision to marry instead of cohabit. We find that the initial decision to form either a cohabiting or a married union is only marginally affected by the income tax consequences of one form of union vs. another, and other factors play a more important role. However, for those already living together as a cohabiting couple, the decision to make the transition from a cohabiting to a married couple is significantly affected by the tax consequences of such a move. Here, an increase in the income tax at legal marriage, or an increase in the marginal tax rate with marriage, has a statistically significant and negative impact on the probability of transition from cohabitation to legal marriage. However, the magnitude of the tax impact is generally small, and several other variables are more important determinants. Copyright Kluwer Academic Publishers 2003

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File URL: http://hdl.handle.net/10.1023/A:1025093300161
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Bibliographic Info

Article provided by Springer in its journal Review of Economics of the Household.

Volume (Year): 1 (2003)
Issue (Month): 3 (September)
Pages: 169-186

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Handle: RePEc:kap:reveho:v:1:y:2003:i:3:p:169-186

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Web page: http://www.springerlink.com/link.asp?id=109451

Related research

Keywords: marriage tax; marriage subsidy; hazard model;

References

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  1. Linda Waite, 1995. "Does marriage matter?," Demography, Springer, vol. 32(4), pages 483-507, November.
  2. Feenberg, Daniel R. & Rosen, Harvey S., 1995. "Recent Developments in the Marriage Tax," National Tax Journal, National Tax Association, vol. 48(1), pages 91-101, March Cit.
  3. Alm, James & Whittington, Leslie A., 1997. "Income taxes and the timing of marital decisions," Journal of Public Economics, Elsevier, vol. 64(2), pages 219-240, May.
  4. Stacy Dickert-Conlin & Amitabh Chandra, 1999. "Taxes and the Timing of Birth," Journal of Political Economy, University of Chicago Press, vol. 107(1), pages 161-177, February.
  5. Becker, Gary S, 1974. "A Theory of Marriage: Part II," Journal of Political Economy, University of Chicago Press, vol. 82(2), pages S11-S26, Part II, .
  6. Whittington, Leslie A & Alm, James & Peters, H Elizabeth, 1990. "Fertility and the Personal Exemption: Implicit Pronatalist Policy in the United States," American Economic Review, American Economic Association, vol. 80(3), pages 545-56, June.
  7. Sean Becketti & William Gould & Lee Lillard & Finis Welch, 1985. "The Panel Study of Income Dynamics After Fourteen Years: An Evaluation," UCLA Economics Working Papers 361, UCLA Department of Economics.
  8. Nancy Landale & Renata Forste, 1991. "Patterns of Entry into Cohabitation and Marriage Among Mainland Puerto Rican Women," Demography, Springer, vol. 28(4), pages 587-607, November.
  9. Larry Bumpass & James Sweet, 1989. "National Estimates of Cohabitation," Demography, Springer, vol. 26(4), pages 615-625, November.
  10. Becker, Gary S, 1973. "A Theory of Marriage: Part I," Journal of Political Economy, University of Chicago Press, vol. 81(4), pages 813-46, July-Aug..
  11. Dickert-Conlin, Stacy & Houser, Scott, 1998. "Taxes and Transfers: A New Look at the Marriage Penalty," National Tax Journal, National Tax Association, vol. 51(n. 2), pages 175-217, June Cita.
  12. Waters, Melissa S. & Ressler, Rand W., 1999. "An economic model of cohabitation and divorce," Journal of Economic Behavior & Organization, Elsevier, vol. 40(2), pages 195-206, October.
  13. Sjoquist, David L. & Walker, Mary Beth, 1995. "The Marriage Tax and the Rate and Timing of Marriage," National Tax Journal, National Tax Association, vol. 48(4), pages 547-58, December .
  14. Alm, James & Whittington, Leslie A, 1999. "For Love or Money? The Impact of Income Taxes on Marriage," Economica, London School of Economics and Political Science, vol. 66(263), pages 297-316, August.
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Cited by:
  1. Blau, David M. & van der Klaauw, Wilbert, 2010. "What Determines Family Structure?," IZA Discussion Papers 4912, Institute for the Study of Labor (IZA).
  2. Fisher, Hayley, 2012. "Just a piece of paper? The effect of marriage on health," Working Papers 2012-17, University of Sydney, School of Economics.
  3. Stevenson, Adam, 2012. "The Labor Supply And Tax Revenue Consequences Of Federal Same-Sex Marriage Legalization," National Tax Journal, National Tax Association, vol. 65(4), pages 783-806, December .

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