The Taxation of Couples

Patricia Apps () and Ray Rees

No 2910, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper is concerned with the question of how couples should be taxed. One reason for the importance of this issue is simply that the overwhelming majority of individuals live in households formed around couples, and so it could be argued that empirically, this is the single most important problem in personal income taxation. A second reason is that the economic theory of optimal taxation and tax reform, at least as it is presented in the mainstream literature, provides little guidance on this issue, resting as it does on models of the single person household. An old insight in the earlier public finance literature is that any discussion of the taxation of two-person households necessarily involves the recognition of the importance of household production. In this paper we try to show how a simple model of household production can be used to help the analysis of optimal taxation and tax reform, and to put the "conventional wisdom", which says that it is optimal to tax women on a separate, lower tax schedule than men, on a firmer basis. What emerges clearly from the analysis is how centrally important the relationship between productivity in household production and female labour supply really is, and how little we know about it empirically.

Keywords: labour supply; household production; optimal taxation (search for similar items in EconPapers)
JEL-codes: D13 H21 J22 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2007-07
New Economics Papers: this item is included in nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

Published - published as "Optimal Taxation and Tax Reform for Two-Earner Households" in: CESifo Economic Studies, 2011, 57 (2), 283-304

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Related works:
Working Paper: The Taxation of Couples (2007)
Working Paper: The Taxation of Couples (2007)
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