The Optimal Taxation of Couples

The existing literature on optimal income taxation is limited in its ability to cast light on issues of family taxation, because the model of the household on which it is based fails to capture two important characteristics of real households: that they typically contain two adults and that domestic production is an important alternative use of time to market labour supply. This paper formulates a simple and tractable model of such a household and then uses it to evaluate alternative systems for taxing couples, in terms primarily of their equity properties.