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Optimal Taxation of Secondary Earners in the Netherlands: Has Equity Lost Ground?

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Listed:
  • Henk-Wim de Boer
  • Egbert Jongen
  • Patrick Koot

Abstract

The Netherlands witnessed major reforms in the taxation of (potential) secondary earners over the past decade. Using the inverse-optimal method of optimal taxation we recover the implicit social welfare weights of single- and dual-earner couples over time. The social welfare weights are grosso modo well-behaved before the reforms. However, after the reforms, they are no longer monotonically declining in income and sometimes negative, suggesting that Pareto-improving reforms are possible. Taken at face value, these results suggest an imbalance between equity and efficiency. However, other considerations may rationalize these findings, like differences in preferences over formal income and informal care.

Suggested Citation

  • Henk-Wim de Boer & Egbert Jongen & Patrick Koot, 2018. "Optimal Taxation of Secondary Earners in the Netherlands: Has Equity Lost Ground?," CPB Discussion Paper 375, CPB Netherlands Bureau for Economic Policy Analysis.
  • Handle: RePEc:cpb:discus:375
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    More about this item

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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