Taxing Children: The Re-Distributive Role of Child Benefits - Revisited

48 Pages Posted: 6 Mar 2010

See all articles by Tomer Blumkin

Tomer Blumkin

Tel Aviv University - Eitan Berglas School of Economics; Ben-Gurion University of the Negev - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Yoram Y. Margalioth

Tel Aviv University - Buchmann Faculty of Law

Efraim Sadka

Tel Aviv University - Eitan Berglas School of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Date Written: February 2010

Abstract

In this paper, we challenge the conventional wisdom that due to the negative correlation between family size and earning ability, family size can be used as a 'tagging' device, and calls for subsidizing children (via child allowances) to enhance egalitarian objectives. We show that the case for subsidizing children crucially hinges on child allowances being provided on a universal basis. Notably, when child benefits are means-tested, taxing children at the margin (namely, setting the total benefits to decline with the number of children) is socially optimal.

Keywords: child allowance, re-distribution, means-testing, universal, tagging, optimal taxation

JEL Classification: D60, H20, H50

Suggested Citation

Blumkin, Tomer and Margalioth, Yoram Y. and Sadka, Efraim, Taxing Children: The Re-Distributive Role of Child Benefits - Revisited (February 2010). CESifo Working Paper Series No. 2970. Available at SSRN: https://ssrn.com/abstract=1564044

Tomer Blumkin (Contact Author)

Tel Aviv University - Eitan Berglas School of Economics ( email )

P.O. Box 39040
Ramat Aviv, Tel Aviv, 69978
Israel

Ben-Gurion University of the Negev - Department of Economics ( email )

Beer-Sheva 84105
Israel
+972 8 647 2268 (Phone)
+972 8 647 2941 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Yoram Y. Margalioth

Tel Aviv University - Buchmann Faculty of Law ( email )

Ramat Aviv
Tel Aviv 69978, IL
Israel
+972-3-6407014 (Phone)
+972-3-6409576 (Fax)

Efraim Sadka

Tel Aviv University - Eitan Berglas School of Economics ( email )

P.O. Box 39040
Ramat Aviv, Tel Aviv, 69978
Israel
+972 3 640 9712 (Phone)
+972 3 642 8074 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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