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Taxing Children: The Re-distributive Role of Child Benefits - Revisited

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  • Tomer Blumkin
  • Yoram Margalioth
  • Efraim Sadka
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    Abstract

    In this paper, we challenge the conventional wisdom that due to the negative correlation between family size and earning ability, family size can be used as a 'tagging' device, and calls for subsidizing children (via child allowances) to enhance egalitarian objectives. We show that the case for subsidizing children crucially hinges on child allowances being provided on a universal basis. Notably, when child benefits are means-tested, taxing children at the margin (namely, setting the total benefits to decline with the number of children) is socially optimal.

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    File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2010/wp-cesifo-2010-02/cesifo1_wp2970.pdf
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    Bibliographic Info

    Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2970.

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    Date of creation: 2010
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    Handle: RePEc:ces:ceswps:_2970

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    Related research

    Keywords: child allowance; re-distribution; means-testing; universal; tagging; optimal taxation;

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