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Income taxation of couples and the tax unit choice

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  • Helmuth Cremer

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  • Jean-Marie Lozachmeur
  • Pierre Pestieau

Abstract

This paper studies the optimal non linear income tax of couples. We build a general unitary model of labor supply and allow multidimensional heterogeneity in a discrete type framework. We concentrate our analysis on the resulting intra-family labor allocation of labor supplies and show that this analysis is strongly related to the choice of the tax unit (individual versus joint taxation). We give a necessary condition to have fully joint taxation in this framework and discuss some examples.
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Suggested Citation

  • Helmuth Cremer & Jean-Marie Lozachmeur & Pierre Pestieau, 2012. "Income taxation of couples and the tax unit choice," Journal of Population Economics, Springer;European Society for Population Economics, vol. 25(2), pages 763-778, January.
  • Handle: RePEc:spr:jopoec:v:25:y:2012:i:2:p:763-778
    DOI: 10.1007/s00148-011-0376-6
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    References listed on IDEAS

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    1. Henrik Jacobsen Kleven & Claus Thustrup Kreiner & Emmanuel Saez, 2009. "The Optimal Income Taxation of Couples," Econometrica, Econometric Society, vol. 77(2), pages 537-560, March.
    2. Boskin, Michael J. & Sheshinski, Eytan, 1983. "Optimal tax treatment of the family: Married couples," Journal of Public Economics, Elsevier, vol. 20(3), pages 281-297, April.
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    4. Blundell, Richard & Macurdy, Thomas, 1999. "Labor supply: A review of alternative approaches," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 27, pages 1559-1695 Elsevier.
    5. Cigno, Alessandro & Pettini, Anna, 2002. "Taxing family size and subsidizing child-specific commodities?," Journal of Public Economics, Elsevier, vol. 84(1), pages 75-90, April.
    6. MaCurdy, Thomas E, 1981. "An Empirical Model of Labor Supply in a Life-Cycle Setting," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1059-1085, December.
    7. Kimmel, Jean & Kniesner, Thomas J., 1998. "New evidence on labor supply:: Employment versus hours elasticities by sex and marital status," Journal of Monetary Economics, Elsevier, vol. 42(2), pages 289-301, July.
    8. Apps, Patricia F. & Rees, Ray, 1988. "Taxation and the household," Journal of Public Economics, Elsevier, vol. 35(3), pages 355-369, April.
    9. Rees, Ray, 1988. "Taxation and the Household," Munich Reprints in Economics 3411, University of Munich, Department of Economics.
    10. Boskin, Michael J., 1975. "Efficiency aspects of the differential tax treatment of market and household economic activity," Journal of Public Economics, Elsevier, vol. 4(1), pages 1-25, February.
    11. Kleven, Henrik Jacobsen, 2004. "Optimum taxation and the allocation of time," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 545-557, March.
    12. Schroyen, Fred, 2003. "Redistributive taxation and the household: the case of individual filings," Journal of Public Economics, Elsevier, vol. 87(11), pages 2527-2547, October.
    13. Craig Brett, 2007. "Optimal nonlinear taxes for families," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 14(3), pages 225-261, June.
    14. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January.
    15. Patricia F. Apps & Ray Rees, 1999. "Individual versus Joint Taxation in Models with Household Production," Journal of Political Economy, University of Chicago Press, vol. 107(2), pages 393-403, April.
    16. Blundell, Richard & Meghir, Costas & Neves, Pedro, 1993. "Labour supply and intertemporal substitution," Journal of Econometrics, Elsevier, vol. 59(1-2), pages 137-160, September.
    17. Chiappori, Pierre-André & Fortin, Bernard & Lacroix, Guy, 1998. "Household Labor Supply, Sharing Rule and the Marriage Market," Cahiers de recherche 9810, Université Laval - Département d'économique.
    18. Cigno, Alessandro, 1986. "Fertility and the Tax-Benefit System: A Reconsideration of the Theory of Family Taxation," Economic Journal, Royal Economic Society, vol. 96(384), pages 1035-1051, December.
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    Citations

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    Cited by:

    1. Immervoll, Herwig & Kleven, Henrik Jacobsen & Kreiner, Claus Thustrup & Verdelin, Nicolaj, 2008. "An evaluation of the tax-transfer treatment of married couples in European countries," EUROMOD Working Papers EM7/08, EUROMOD at the Institute for Social and Economic Research.
    2. Erwin Ooghe & Andreas Peichl, 2015. "Fair and Efficient Taxation under Partial Control," Economic Journal, Royal Economic Society, vol. 125(589), pages 2024-2051, December.
    3. Henrik Jacobsen Kleven & Claus Thustrup Kreiner & Emmanuel Saez, 2007. "The Optimal Income Taxation of Couples as a Multi-Dimensional Screening Problem," CESifo Working Paper Series 2092, CESifo Group Munich.
    4. Aronsson, Thomas & Granlund, David, 2013. "Gender Norms, Work Hours, and Corrective Taxation," HUI Working Papers 83, HUI Research.
    5. Marie-Louise Leroux & Grégory Ponthière, 2013. "Optimal prevention when coexistence matters," Journal of Population Economics, Springer;European Society for Population Economics, vol. 26(3), pages 1095-1127, July.
    6. Patricia Apps & Ray Rees, 2012. "Optimal Taxation, Child Care and Models of the Household," CEPR Discussion Papers 673, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    7. Cremer, Helmuth & Lozachmeur, Jean-Marie & Roeder, Kerstin, 2017. "Household bargaining, spouses' consumption patterns and the design of commodity taxes," TSE Working Papers 17-767, Toulouse School of Economics (TSE).
    8. Cremer, Helmuth & Lozachmeur, Jean-Marie & Maldonado, Dario & Roeder, Kerstin, 2016. "Household bargaining and the design of couples’ income taxation," European Economic Review, Elsevier, vol. 89(C), pages 454-470.
    9. Aronsson, Thomas & Granlund, David, 2015. "Gender norms, work hours, and corrective taxation," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 56(C), pages 33-39.
    10. Immervoll, Herwig & Kleven, Henrik Jacobsen & Kreiner, Claus Thustrup & Verdelin, Nicolaj, 2011. "Optimal tax and transfer programs for couples with extensive labor supply responses," Journal of Public Economics, Elsevier, vol. 95(11), pages 1485-1500.
    11. Normann Lorenz & Dominik Sachs, 2012. "Optimal Participation Taxes and Efficient Transfer Phase-Out," Working Paper Series of the Department of Economics, University of Konstanz 2012-37, Department of Economics, University of Konstanz.
    12. Tomer Blumkin & Yoram Margalioth & Efraim Sadka, 2010. "Taxing Children: The Re-distributive Role of Child Benefits - Revisited," CESifo Working Paper Series 2970, CESifo Group Munich.
    13. Patricia Apps & Ray Rees, 2010. "Australian Family Tax Reform and the Targeting Fallacy," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 43(2), pages 153-175.
    14. LEROUX, Marie - Louise & PONTHIERE, Grégory, 2009. "Wives, husbands and wheelchairs : Optimal tax policy under gender-specific health," CORE Discussion Papers 2009071, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    15. repec:spr:epolit:v:34:y:2017:i:2:d:10.1007_s40888-016-0039-x is not listed on IDEAS
    16. Marie-Louise Leroux & Grégory Ponthière, 2009. "Wives, husbands and wheelchairs: Optimal tax policy under gender-specific health," Working Papers halshs-00575059, HAL.
    17. repec:sbe:breart:v:36:y:2016:i:1:a:47745 is not listed on IDEAS

    More about this item

    Keywords

    Optimal income taxation; Tax unit; Household labor supply; H21; H31; D10;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • D10 - Microeconomics - - Household Behavior - - - General

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