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Welfare Effects of a Shift of Joint to Individual Taxation in the German Personal Income Tax

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  • André Decoster
  • Peter Haan

Abstract

We empirically derive the welfare effects of a shift from joint to individual taxation of married households in Germany. For the welfare evaluation we estimate the preference heterogeneity and use normative welfare concepts proposed by Fleurbaey (2006) to address the difficulties of comparison between and aggregation of heterogeneous agents. Our results suggest that the normative choice of the welfare metric can be crucial, in particular for the simple question who are the gainers and who are the losers in a reform. Further, we find that it is possible to design a system of individual taxation that would be welfare-improving for different welfare metrics.

Suggested Citation

  • André Decoster & Peter Haan, 2014. "Welfare Effects of a Shift of Joint to Individual Taxation in the German Personal Income Tax," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 70(4), pages 599-624, December.
    • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(201412)70:4_599:weoaso_2.0.tx_2-p
    DOI: 10.1628/001522108X685500
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    Cited by:

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    2. Antoine de Mahieu, 2021. "In-work Benefits in Belgium: Effects on Labour Supply and Welfare," International Journal of Microsimulation, International Microsimulation Association, vol. 14(1), pages 43-72.
    3. Melanie Schröder & Norma Burow, 2016. "Couple's Labor Supply, Taxes, and the Division of Housework in a Gender-Neutral Lab," Discussion Papers of DIW Berlin 1593, DIW Berlin, German Institute for Economic Research.

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    More about this item

    Keywords

    taxation of couples; welfare measures; labor supply; preference heterogeneity;
    All these keywords.

    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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