The Taxation of Couples
AbstractThis 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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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2910.
Length: 23 pages
Date of creation: Jul 2007
Date of revision:
Publication status: published as "Optimal Taxation and Tax Reform for Two-Earner Households" in: CESifo Economic Studies, 2011, 57 (2), 283-304
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Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Other versions of this item:
- Patricia Apps & Ray Rees, 2007. "The Taxation of Couples," CEPR Discussion Papers 559, Centre for Economic Policy Research, Research School of Economics, Australian National University.
- Patricia Apps & Ray Rees, 2007. "The Taxation of Couples," Discussion Papers 07/21, Department of Economics, University of York.
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-08-08 (All new papers)
- NEP-PBE-2007-08-08 (Public Economics)
- NEP-PUB-2007-08-08 (Public Finance)
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.:
- Rees, Ray, 1988. "Taxation and the Household," Munich Reprints in Economics 3411, University of Munich, Department of Economics.
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"The Tax Unit and Household Production,"
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- Apps,Patricia & Rees,Ray, 2009.
"Public Economics and the Household,"
Cambridge University Press, number 9780521716284, November.
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"Optimal tax treatment of the family: Married couples,"
Journal of Public Economics,
Elsevier, vol. 20(3), pages 281-297, April.
- Michael J. Boskin & Eytan Sheshinski, 1984. "Optimal Tax Treatment of the Family: Married Couples," NBER Working Papers 0368, National Bureau of Economic Research, Inc.
- Martin Feldstein & Daniel R. Feenberg, 1996.
"The Taxation of Two-Earner Families,"
in: Empirical Foundations of Household Taxation, pages 39-75
National Bureau of Economic Research, Inc.
- Apps, Patricia F. & Rees, Ray, 1988. "Taxation and the household," Journal of Public Economics, Elsevier, vol. 35(3), pages 355-369, April.
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