Individual Vs Family Taxation: An Analysis Using Tabeita04
Econpubblica Working Paper No. 118
30 Pages Posted: 6 Feb 2009
Date Written: December 5, 2006
In this paper we analyze whether Italian families, and especially those with children, would benefit from a tax system defined on a family rather than an individual tax unit. This analysis is performed using TABEITA04, the tax-benefit microsimulation model developed at Econpubblica on a representative sample of 2004 Italian households.
Results show that family with kids would, on average, lose from such a reform as they are better off with the actual individual tax system, which provides generous tax credits for family burdens. The simulated reform could also be extremely costly in terms of labor force participation of spouses: in our sample, over 80% of spouses are not working and nearly 40% of them would face an increased marginal tax rate if the family tax unit was introduced. Those benefiting the most would be couples without children where both spouses are working, who are not enjoying any tax credit in the current tax system.
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