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Income taxation of couples, spouses’ labor supplies and the gender wage gap

Helmuth Cremer () and Kerstin Roeder

Economics Letters, 2019, vol. 175, issue C, 71-75

Abstract: We study the taxation of couples when female wages do not reflect their true productivity. We show that the expression for the marginal tax rates of the male spouses is the same as in a Mirrleesian world where wages reflect true productivities. Marginal taxes for the female spouses are reduced because of a Pigouvian correction. Consequently, the wage discrimination pleads for a lower marginal tax on the female spouse. Furthermore, the distortion of a couples’ tradeoff between male and female labor supply is the same as in a Mirrleesian world without a gender wage gap. It only depends on true productivities and not on wages. In other words, the tax system completely neutralizes the extra distortion introduced by the wedge between the female spouse’s wage and her true productivity.

Keywords: Couples’ income taxation; Gender wage gap; Optimal income taxation; Household labor supply (search for similar items in EconPapers)
JEL-codes: H21 H31 D10 J16 J22 (search for similar items in EconPapers)
Date: 2019
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Working Paper: Income taxation of couples, spouses' labor supplies and the gender wage gap (2018) Downloads
Working Paper: Income taxation of couples, spouses' labor supplies and the gender wage gap (2018) Downloads
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