Working Paper: CEPR ID: DP18138
Authors: Felix Bierbrauer; Pierre Boyer; Andreas Peichl; Daniel Weishaar
Abstract: This paper studies the tax treatment of couples. We develop two different approaches. One is tailored to the analysis of tax systems that stick to the principle that the tax base for couples is the sum of their incomes. One is tailored to the analysis of reforms toward individual taxation. We study the US federal income tax since the 1960s through the lens of this framework. We find that, in the recent past, realizing efficiency gains requires lowering marginal tax rates for secondary earners. We also find that revenue-neutral reforms towards individual taxation are in the interest of couples with high secondary earnings while couples with low secondary earnings are worse off. The support for such a reform recently passed the majority threshold. It is rejected, however, by a Rawlsian social welfare function. Thus, there is a tension between Rawlsian and Feminist notions of social welfare.
Keywords: Taxation of couples; Tax reforms; Optimal taxation; Political economy; Nonlinear income taxation
JEL Codes: C72; D72; D82; H21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| reducing marginal tax rates for secondary earners (H31) | efficiency gains (D61) |
| higher secondary earnings (J31) | decreased labor supply (J20) |
| revenue-neutral reforms towards individual taxation (H29) | benefit couples with high secondary earnings (J32) |
| revenue-neutral reforms towards individual taxation (H29) | harm couples with low secondary earnings (J12) |
| increased tax rates on primary earners (H31) | decreased overall disposable income for couples with dominant income (J12) |
| political feasibility of reforms (D72) | majority support among couples with dual incomes (J12) |
| reforms that reduce marginal tax rates (H31) | welfare improvement under feminist social welfare functions (D69) |
| reforms that reduce marginal tax rates (H31) | detrimental effects from a Rawlsian perspective (D63) |