Household Taxation, Income Splitting and Labor Supply Incentives - A Microsimulation Study for Germany

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may Abstract:We analyze potential labor supply effects of a shift from the current German system of joint taxation of married couples to a system of limited real income splitting on the basis of an econometric household labor supply model embedded in a tax-benefit model. Our simulation results show relatively small labor supply effects of a shift from the current system to one of limited real income splitting system. In the benchmark scenario of a shift to separate taxation labor supply of wives would increase substantially in west Germany, while a significant number of husbands would drop out of the labor force.

Tax incentives and family labor supply in Austria

“…While the hours elasticity for single men is in a comparable range, our estimates for (Steiner and Wrohlich, 2004;Peichl et al, 2010) or Belgium (Orsini, 2006), are in similar ranges. For further interpretation of these elasticities we present two additional sets of results.…”

Financial support for families with children and its trade-offs: balancing redistribution and parental work incentives

“…In the case of parents of pre-school children joint employment involves often substantial childcare costs, which further contributes to the financial disincentives to work for the second earner. Research on the consequences of such features using data for other countries suggests that they play an important role in determining the pattern of employment among couples (Dearing et al, 2007;Steiner and Wrohlich, 2004).…”

Introducing Family Tax Splitting in Germany: How Would It Affect the Income Distribution, Work Incentives, and Household Welfare?

“…In fact, it has been shown that the relatively low labor force participation rate of married women in Germany is closely related to the negative labor supply incentives for secondary earners implied by the tax system (Steiner and Wrohlich 2004;see Dearing et al (2007) for a comparison between Germany and Austria, a countriy with individual income taxation. ).…”

“…Estimation results proved rather insensitive to realistic changes in the value chosen for this parameter. For example, changing the maximum number from 80 to 60 hours per week had very little effect on the estimation results 17 For a more detailed description and motivation of this model, see Steiner and Wrohlich (2004) referring to the non-linear terms, the vector β the corresponding coefficients of the linear terms. ε k is a stochastic error term accounting for factors affecting the household's utility other than leisure and income.…”