Optimal Taxation of Married Couples with Household Production

Henrik Jacobsen Kleven and Claus Kreiner
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Henrik Jacobsen Kleven: Institute of Economics, University of Copenhagen

No 04-10, EPRU Working Paper Series from Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics

Abstract: The literature suggests that the concern for economic efficiency calls for individual-based taxation of married couples with a higher rate on the primary earner. This paper reconsiders the choice of tax unit in the Becker model of household production. Our aim is to study the robustness of previous results to the modelling of time allocation. In addition, we analyze the interaction between the optimal income tax for couples and the chosen commodity tax structure. In the absence of restrictions on the use of commodity taxes, efficient taxation requires joint taxation of the family. In the presence of restricted commodity taxation, the income tax should compensate for the erroneous commodity taxes. In this case, individual taxation is typically optimal, but not necessarily with a higher rate on primary earners as usually suggested.

JEL-codes: D13 H21 J22 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2004-08
New Economics Papers: this item is included in nep-pbe and nep-pub
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Journal Article: Optimal Taxation of Married Couples with Household Production (2007)
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