Tax Planning of Married Couples and Intra-Household Income Inequality

Büttner T, Erbe K, Grimm V (2019)


Publication Language: English

Publication Type: Journal article, Original article

Publication year: 2019

Journal

Book Volume: 179

URI: https://www.finanzwissenschaft.rw.fau.de/files/2020/02/gender_bias_paper_17_July_2019_for_publication.pdf

DOI: 10.1016/j.jpubeco.2019.104048

Abstract

This paper examines tax planning of married couples under separate taxation. It shows that concerns about the intra-household income distribution prevent couples from minimizing tax payments. The empirical analysis exploits a specific feature of the German tax system, which allows married couples to save taxes by deviating from the default symmetric payroll-tax treatment and assigning favorable tax treatment to the primary earner and unfavorable tax treatment to the secondary earner. Based on a representative random sample of individual tax files, we find that a couple is less likely to choose the tax-minimizing treatment if tax planning is associated with a larger decline of the net-of-tax income of the secondary earner. This applies regardless of whether the husband or the wife is the main earner. However, couples where the wife is the main earner are generally more reluctant to assign the more favorable tax treatment to the wife.

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APA:

Büttner, T., Erbe, K., & Grimm, V. (2019). Tax Planning of Married Couples and Intra-Household Income Inequality. Journal of Public Economics, 179. https://dx.doi.org/10.1016/j.jpubeco.2019.104048

MLA:

Büttner, Thiess, Katharina Erbe, and Veronika Grimm. "Tax Planning of Married Couples and Intra-Household Income Inequality." Journal of Public Economics 179 (2019).

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