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The Taxation of Couples

  • Apps, Patricia


    (University of Sydney)

  • Rees, Ray


    (University of Munich)

This paper is concerned with the question of how couples should be taxed. One reason for the importance of this issue is simply that the overwhelming majority of individuals live in households formed around couples, and so it could be argued that empirically, this is the single most important problem in personal income taxation. A second reason is that the economic theory of optimal taxation and tax reform, at least as it is presented in the mainstream literature, provides little guidance on this issue, resting as it does on models of the single person household. An old insight in the earlier public finance literature is that any discussion of the taxation of two-person households necessarily involves the recognition of the importance of household production. In this paper we try to show how a simple model of household production can be used to help the analysis of optimal taxation and tax reform, and to put the "conventional wisdom", which says that it is optimal to tax women on a separate, lower tax schedule than men, on a firmer basis. What emerges clearly from the analysis is how centrally important the relationship between productivity in household production and female labour supply really is, and how little we know about it empirically.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2910.

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Length: 23 pages
Date of creation: Jul 2007
Date of revision:
Publication status: published as "Optimal Taxation and Tax Reform for Two-Earner Households" in: CESifo Economic Studies, 2011, 57 (2), 283-304
Handle: RePEc:iza:izadps:dp2910
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  1. Apps, Patricia & Rees, Ray, 1999. "On the taxation of trade within and between households," Journal of Public Economics, Elsevier, vol. 73(2), pages 241-263, August.
  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.
  3. repec:oup:restud:v:39:y:1972:i:3:p:297-302 is not listed on IDEAS
  4. Martin Feldstein & Daniel Feenberg, 1995. "The Taxation of Two Earner Families," NBER Working Papers 5155, National Bureau of Economic Research, Inc.
  5. Apps, Patricia, 1982. "Institutional inequality and tax incidence," Journal of Public Economics, Elsevier, vol. 18(2), pages 217-242, July.
  6. Rees, Ray, 1988. "Taxation and the Household," Munich Reprints in Economics 3411, University of Munich, Department of Economics.
  7. Myles,Gareth D., 1995. "Public Economics," Cambridge Books, Cambridge University Press, number 9780521497695.
  8. Apps, Patricia F. & Rees, Ray, 1988. "Taxation and the household," Journal of Public Economics, Elsevier, vol. 35(3), pages 355-369, April.
  9. John Piggott & John Whalley, 1994. "The Tax Unit and Household Production," NBER Working Papers 4820, National Bureau of Economic Research, Inc.
  10. Auerbach, Alan J. & Hines, James Jr., 2002. "Taxation and economic efficiency," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 21, pages 1347-1421 Elsevier.
  11. repec:oup:restud:v:38:y:1971:i:114:p:175-208 is not listed on IDEAS
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