Optimal Income Taxation of Married Couples: An Empirical Analysis of Joint and Individual Taxation

Peter Haan and Dolores Navarro

No 838, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: In this paper we develop a discrete model of optimal taxation of married couples and empirically discuss the optimality of income taxation for this group. To this end, we derive the social welfare function which guarantees that joint taxation of married couples is optimal. We will contrast this welfare function with the one that makes a system of individual taxation optimal. For the empirical application we use a static structural labor supply model to estimate the preferences of households. We find that the system of joint taxation is only optimal when the government has a high taste for redistribution towards one-earner couples and a very low or even negative taste for redistribution towards couples in which both partners earn a similar amount of income. In contrast, the optimality of individual taxation is less dependent of the working composition within the household.

Keywords: Optimal taxation of married couples; joint taxation; labor supply estimation (search for similar items in EconPapers)
Pages: 35 p.
Date: 2008
New Economics Papers: this item is included in nep-pub
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Citations: View citations in EconPapers (6)

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Working Paper: Optimal Income Taxation of Married Couples: An Empirical Analysis of Joint and Individual Taxation (2008)
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