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Optimal Tax Treatment of the Family: Married Couples

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  • Michael J. Boskin
  • Eytan Sheshinski

Abstract

This paper examines the appropriate tax treatment of the family in a series of analytical models and numerical examples. For a population of taxpaying couples which differ in earning capacity, we derive the optimal tax rates for each potential earner. These rates depend crucially upon own and cross labor supply elasticities and the joint distribution of wage rates. Our results suggest that the current system of income splitting in the United States, under which husbands and wives face equal marginal tax rates, is non-optimal. Using results from recent econometric studies, and allowing for a sensitivity analysis, the optimal tax rates on secondary workers in the family are much lower than those on primary earners. Indeed, our best estimate is that the secondary earner would face tax rates only one-half as high as primary earners.

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File URL: http://www.nber.org/papers/w0368.pdf
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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0368.

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Date of creation: Jul 1979
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Publication status: published as Boskin, Michael J. and Eytan Sheshinski. "Optimal Tax Treatment of the Family: Married Couples." Journal of Public Economics, Vol. 20, (August 1983),pp. 281-297. Journal of Economic Literature, Vol. 22, No. 1, (March 1984) .
Handle: RePEc:nbr:nberwo:0368

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