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Family size and optimal income taxation

Author

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  • Helmuth Cremer
  • Arnaud Dellis
  • Pierre Pestieau

Abstract

This paper studies the role of family size in the design of optimal income taxation. We consider a second best setting where the government observes the number of children and the income of the parents but not their productivity. With a linear tax schedule the marginal tax rate is shown to decrease with the number of children, while the relationship between the demogrant and family size appears to be ambiguous. With two ability levels, optimal non-linear income tax implies zero marginal tax rates for the higher ability parents; low ability parents have positive marginal tax rates that decrease with family size. Copyright Springer-Verlag Berlin Heidelberg 2003

Suggested Citation

  • Helmuth Cremer & Arnaud Dellis & Pierre Pestieau, 2003. "Family size and optimal income taxation," Journal of Population Economics, Springer;European Society for Population Economics, vol. 16(1), pages 37-54, February.
    • Handle: RePEc:spr:jopoec:v:16:y:2003:i:1:p:37-54
    DOI: 10.1007/s001480100113
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    Cited by:

    1. Alessandro Balestrino & Alessandro Cigno & Anna Pettini, 2002. "Endogenous Fertility and the Design of Family Taxation," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 9(2), pages 175-193, March.
    2. Erwin Ooghe & Andreas Peichl, 2015. "Fair and Efficient Taxation under Partial Control," Economic Journal, Royal Economic Society, vol. 125(589), pages 2024-2051, December.
    3. Alessandro Cigno & Annalisa Luporini, 2011. "Optimal Family Policy in the Presence of Moral Hazard when the Quantity and Quality of Children are Stochastic," CESifo Economic Studies, CESifo Group, vol. 57(2), pages 349-364, June.
    4. Sören Blomquist & Vidar Christiansen & Luca Micheletto, 2010. "Public Provision of Private Goods and Nondistortionary Marginal Tax Rates," American Economic Journal: Economic Policy, American Economic Association, vol. 2(2), pages 1-27, May.
    5. Takuya Obara & Yoshitomo Ogawa, 2020. "Optimal Taxation in an Endogenous Fertility Model with Non-Cooperative Couples," Discussion Paper Series 211, School of Economics, Kwansei Gakuin University, revised Jan 2021.
    6. Cigno, Alessandro & Pettini, Anna, 2002. "Taxing family size and subsidizing child-specific commodities?," Journal of Public Economics, Elsevier, vol. 84(1), pages 75-90, April.
    7. Kristof Witte & Wim Moesen, 2010. "Sizing the government," Public Choice, Springer, vol. 145(1), pages 39-55, October.
    8. Blumkin, Tomer & Margalioth, Yoram & Sadka, Efraim, 2010. "Taxing Children: The Re-distributive Role of Child Benefits - Revisited," Foerder Institute for Economic Research Working Papers 275758, Tel-Aviv University > Foerder Institute for Economic Research.
    9. Volker Meier & Matthias Wrede, 2013. "Reducing the excess burden of subsidizing the stork: joint taxation, individual taxation, and family tax splitting," Journal of Population Economics, Springer;European Society for Population Economics, vol. 26(3), pages 1195-1207, July.
    10. Mari, Gabriele, 2023. "Less for more? Cuts to child benefits, family adjustments, and long-run child outcomes in larger families," SocArXiv e3n82, Center for Open Science.
    11. Bönke, Timm & Eichfelder, Sebastian, 2008. "Horizontale Gleichheit im Abgaben-Transfersystem: eine Analyse äquivalenter Einkommen von Arbeitnehmern in Deutschland," arqus Discussion Papers in Quantitative Tax Research 36, arqus - Arbeitskreis Quantitative Steuerlehre.
    12. Edyta Małecka-Ziembińska & Radosław Ziembiński, 2020. "Application of Genetic Algorithm to Optimal Income Taxation," JRFM, MDPI, vol. 13(11), pages 1-24, October.
    13. de Boer, Henk-Wim & Jongen, Egbert L. W. & Koot, Patrick, 2023. "Too Much of a Good Thing? Using Tax Incentives to Stimulate Dual-Earner Couples," IZA Discussion Papers 16702, Institute of Labor Economics (IZA).
    14. Alessandro Balestrino, 2012. "Family Taxation, Fertility, and Horizontal Equity: A Political Economy Perspective," CESifo Working Paper Series 3774, CESifo.
    15. Tomer Blumkin & Yoram Margalioth & Efraim Sadka, 2015. "The Re-distributive Role of Child Benefits Revisited," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 22(3), pages 476-501, June.
    16. Blumkin, Tomer & Margalioth, Yoram & Sadka, Efraim, 2014. "The Redistributive Role of Child Benefits Revisited," Foerder Institute for Economic Research Working Papers 275798, Tel-Aviv University > Foerder Institute for Economic Research.
    17. Alessandro Cigno & Annalisa Luporini, 2006. "Optimal Policy Towards Families with Different Amounts of Social Capital, in the Presence of Asymmetric Information and Stochastic Fertility," CESifo Working Paper Series 1664, CESifo.
    18. Tomer Blumkin & Yoram Margalioth & Efraim Sadka, 2010. "Taxing Children: The Re-distributive Role of Child Benefits - Revisited," CESifo Working Paper Series 2970, CESifo.
    19. Blomquist, Sören & Christiansen, Vidar, 2004. "Welfare Enhancing Marginal Tax Rates: The Case of Publicly Provided Day Care," Arbetsrapport 2004:6, Institute for Futures Studies.
    20. Alessandro Cigno, 2001. "Comparative Advantage, Observability, and the Optimal Tax Treatment of Families with Children," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 8(4), pages 455-470, August.
    21. Gerlinde Verbist & Wim Van Lancker, 2016. "Horizontal and Vertical Equity Objectives of Child Benefit Systems: An Empirical Assessment for European Countries," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 128(3), pages 1299-1318, September.

    More about this item

    Keywords

    JEL classification: J13; H21; H23; Key words: Family size; optimal taxation;
    All these keywords.

    JEL classification:

    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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