This paper is concerned with the question of how couples should be taxed. One reason for the importance of this issue is simply that the overwhelming majority of individuals live in households formed around couples, and so it could be argued that empirically, this is the single most important problem in personal income taxation. A second reason is that the economic theory of optimal taxation and tax reform, at least as it is presented in the mainstream literature, provides little guidance on this issue, resting as it does on models of the single person household. An old insight in the earlier public finance literature is that any discussion of the taxation of two-person households necessarily involves the recognition of the importance of household production. In this paper we try to show how a simple model of household production can be used to help the analysis of optimal taxation and tax reform, and to put the "conventional wisdom", which says that it is optimal to tax women on a separate, lower tax schedule than men, on a firmer basis. What emerges clearly from the analysis is how centrally important the relationship between productivity in household production and female labour supply really is, and how little we know about it empirically.
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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number
2910.
Patricia Apps & Ray Rees, 2007.
"The Taxation of Couples,"
CEPR Discussion Papers
559, Centre for Economic Policy Research, Research School of Social Sciences, Australian National University.
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Find related papers by JEL classification: H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Auerbach, Alan J. & Hines, James Jr., 2002.
"Taxation and economic efficiency,"
Handbook of Public Economics,
in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 21, pages 1347-1421
Elsevier.
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Other versions:
Martin Feldstein & Daniel R. Feenberg, 1996.
"The Taxation of Two-Earner Families,"
NBER Chapters,
in: Empirical Foundations of Household Taxation, pages 39-75
National Bureau of Economic Research, Inc.
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