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Optimal Distribution and Taxation of the Family


  • Louis Kaplow


Income tax burdens on family units are adjusted to reflect differences in ability to pay attributable to whether the unit consists of a single individual or a married couple and how many dependents are present. Substantial controversy exists over the appropriate forms of adjustment, and existing approaches to taxation of the family vary greatly across jurisdictions. This article derives equitable relative tax burdens for different family configurations from a utilitarian welfare function. The analysis considers how relative burdens should depend on the extent to which resources are shared among family members, the existence of economies of scale, the presence of altruism among family members, whether expenditures on children should be viewed as part of parents' consumption, and the possibility that some family members (children) have different utility functions from others.

Suggested Citation

  • Louis Kaplow, 1992. "Optimal Distribution and Taxation of the Family," NBER Working Papers 4189, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:4189
    Note: PE

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    References listed on IDEAS

    1. 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.
    2. Choi, E. Kwan & Menezes, Carmen F., 1992. "Is relative risk aversion greater than one?," International Review of Economics & Finance, Elsevier, vol. 1(1), pages 43-54.
    3. Kaplow, Louis, 1995. "A note on subsidizing gifts," Journal of Public Economics, Elsevier, vol. 58(3), pages 469-477, November.
    4. Pechman, Joseph A. & Engelhardt, Gary V., 1990. "The Income Tax Treatment of the Family: An International Perspective," National Tax Journal, National Tax Association, vol. 43(1), pages 1-22, March.
    5. Nerlove, Marc & Razin, Assaf & Sadka, Efraim, 1986. "Some Welfare Theoretic Implications of Endogenous Fertility," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(1), pages 3-31, February.
    6. Pollak, Robert A & Wales, Terence J, 1979. "Welfare Comparisons and Equivalence Scales," American Economic Review, American Economic Association, vol. 69(2), pages 216-221, May.
    7. Pechman, Joseph A. & Engelhardt, Gary V., 1990. "The Income Tax Treatment of the Family: An International Perspective," National Tax Journal, National Tax Association, vol. 43(1), pages 1-22, March.
    8. Mirrlees, James A., 1972. "Population policy and the taxation of family size," Journal of Public Economics, Elsevier, vol. 1(2), pages 169-198, August.
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    Cited by:

    1. Bernd Genser & Andreas Reutter, 2007. "Moving Towards Dual Income Taxation in Europe," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 63(3), pages 436-456, September.
    2. Chiuri, Maria Concetta, 2000. "Individual decisions and household demand for consumption and leisure," Research in Economics, Elsevier, vol. 54(3), pages 277-324, September.
    3. Zhijun Zhao, 2011. "Preference Relativity, Ambiguity and Social Welfare Evaluation," Working Papers 352011, Hong Kong Institute for Monetary Research.

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