Reform Proposal for Marriage Taxation in Germany: De Facto Income Splitting with a Low Transferable Amount

Stefan Bach (), Björn Fischer-Weckemann, Peter Haan and Katharina Wrohlich

DIW Weekly Report, 2020, vol. 10, issue 41/42, 423-432

Abstract: Two traditional options for reforming Ehegattensplitting, the joint taxation of married couples with full income splitting, are de facto income splitting (Realsplitting) or individual taxation with a transferable personal allowance. However, these proposals do not significantly reduce the marginal tax burden on the secondary earner’s income and therefore only minimally encourage married women to participate in the labor market. Another option for reform is an additional personal allowance for married couples, but this concept is difficult to understand and further benefits dual income couples with middle and high incomes. Moreover, alternative methods of taxing married couples in Germany must adhere to specific legal regulations. A satisfactory compromise would thus be de facto income splitting for married couples with a transferable amount equal to the personal allowance. This proposal fulfills the legal criteria, is easily understandable, generates a certain amount of additional tax revenue, avoids burdening the lower and middle income brackets, and encourages secondary earners to participate in the labor market.

Keywords: Family taxation; tax reform; female labor supply; income distribution (search for similar items in EconPapers)
JEL-codes: D13 D31 H24 J22 (search for similar items in EconPapers)
Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.diw.de/documents/publikationen/73/diw_01.c.800659.de/dwr-20-41-1.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:diw:diwdwr:dwr10-41-1

Access Statistics for this article

DIW Weekly Report is currently edited by Tomaso Duso, Marcel Fratzscher, Peter Haan, Claudia Kemfert, Alexander Kritikos, Alexander Kriwoluzky, Stefan Liebig, Lukas Menkhoff, Karsten Neuhoff, Carsten Schröder, Katharina Wrohlich and Sabine Fiedler

More articles in DIW Weekly Report from DIW Berlin, German Institute for Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by Bibliothek ().