Optimal Income Taxation of Married Couples: An Empirical Analysis of Joint and Individual Taxation

Peter Haan and Dolores Navarro ()
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Dolores Navarro: Universitat Autònoma de Barcelona

No 3819, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: In this paper we develop a discrete model of optimal taxation of married couples and empirically discuss the optimality of income taxation for this group. To this end, we derive the social welfare function which guarantees that joint taxation of married couples is optimal. We will contrast this welfare function with the one that makes a system of individual taxation optimal. For the empirical application we use a static structural labor supply model to estimate the preferences of households. We find that the system of joint taxation is only optimal when the government has a high taste for redistribution towards one-earner couples and a very low or even negative taste for redistribution towards couples in which both partners earn a similar amount of income. In contrast, the optimality of individual taxation is less dependent of the working composition within the household.

Keywords: joint taxation; optimal taxation of married couples; labor supply estimation (search for similar items in EconPapers)
JEL-codes: C25 H21 J22 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2008-11
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Citations: View citations in EconPapers (6)

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Working Paper: Optimal Income Taxation of Married Couples: An Empirical Analysis of Joint and Individual Taxation (2008)
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