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Reducing the Excess Burden of Subsidizing the Stork: Joint Taxation, Individual Taxation, and Family Tax Splitting

  • Volker Meier

    ()

  • Matthias Wrede

Analyzing a homogenous household setting with endogenous fertility and endogenous labor supply, we demonstrate that moving from joint taxation to individual taxation and adapting child benefits so as to keep fertility constant entails a Pareto improvement. The change is associated with an increase in labor supply and consumption and a reduction of the marginal income tax, while the child benefit may move in either direction. Similarly, a move from joint taxation to some scheme of family tax splitting increases labor supply and welfare.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2008/wp-cesifo-2008-11/cesifo1_wp2470.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2470.

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Date of creation: 2008
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Handle: RePEc:ces:ceswps:_2470
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  5. Meier, Volker & Rainer, Helmut, 2011. "On the Optimality of Joint Taxation for Non-Cooperative Couples," Annual Conference 2011 (Frankfurt, Main): The Order of the World Economy - Lessons from the Crisis 48696, Verein für Socialpolitik / German Economic Association.
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  7. CREMER, Helmuth & DELLIS, Arnaud & PESTIEAU, Pierre, 2001. "Family size and optimal income taxation," CORE Discussion Papers 2001021, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. Laisney, François & Beninger, Denis & Beblo, Miriam, 2003. "Family Tax Splitting: A Microsimulation of its Potential Labour Supply and Intra-household Welfare Effects in Germany," ZEW Discussion Papers 03-32, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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  10. Henrik Jacobsen Kleven & Claus Thustrup Kreiner, 2004. "Optimal Taxation of Married Couples with Household Production," EPRU Working Paper Series 04-10, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
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  15. Fraser, Clive D, 2001. "Income Risk, the Tax-Benefit System and the Demand for Children," Economica, London School of Economics and Political Science, vol. 68(269), pages 105-25, February.
  16. Alessandro Cigno & Annalisa Luporini & Anna Pettini, 2000. "Endogenous Fertility And The Design Of Family Taxation," CHILD Working Papers wp03_00, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
  17. Alessandro Cigno & Annalisa Luporini & Anna Pettini, 2000. "Tranfers to families with children as a principal-agent problem," CHILD Working Papers wp02_00, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
  18. Michiel Evers & Ruud Mooij & Daniel Vuuren, 2008. "The Wage Elasticity of Labour Supply: A Synthesis of Empirical Estimates," De Economist, Springer, vol. 156(1), pages 25-43, March.
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  21. 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.
  22. Meier, Volker & Rainer, Helmut, 2012. "On the optimality of joint taxation for noncooperative couples," Munich Reprints in Economics 19177, University of Munich, Department of Economics.
  23. 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.
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