Tax Minimization by French Cohabiting Couples

Olivier Bargain, Damien Échevin, Audrey Etienne (), Nicolas Moreau and Adrien Pacifico
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Audrey Etienne: LERN - Laboratoire d'Economie Rouen Normandie - UNIROUEN - Université de Rouen Normandie - NU - Normandie Université - IRIHS - Institut de Recherche Interdisciplinaire Homme et Société - UNIROUEN - Université de Rouen Normandie - NU - Normandie Université
Adrien Pacifico: AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper examines the tax returns of French cohabiting couples with children. These couples form two separate tax units and must optimally assign their children to the tax unit of one of the parents to optimize tax rebates. We find that children are allocated in a way that minimizes tax liability in 75 percent of cohabiting households. The 25 percent of households that fail to minimize their liability appear to use heuristics, are influenced by inertia, and possibly fail to fully cooperate as suboptimal couples tend to separate more and marry less in the subsequent period.

Keywords: tax returns; learning; income taxation; noncooperative model; efficiency; D - Microeconomics/D.D1 - Household Behavior and Family Economics/D.D1.D13 - Household Production and Intrahousehold Allocation D - Microeconomics/D.D6 - Welfare Economics/D.D6.D61 - Allocative Efficiency • Cost–Benefit Analysis H - Public Economics/H.H3 - Fiscal Policies and Behavior of Economic Agents/H.H3.H31 - Household (search for similar items in EconPapers)
Date: 2022-06-01
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Published in National Tax Journal, 2022, 75 (2), pp.265-296. ⟨10.1086/719427⟩

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Journal Article: Tax Minimization by French Cohabiting Couples (2022)
Working Paper: Tax Minimization by French Cohabiting Couples (2022)
Working Paper: Tax Minimization by French Cohabiting Couples (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04817651

DOI: 10.1086/719427

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