Leonie Koch, LMU Munich

Tax Policy & Gender (In)equality

How does a move from joint taxation to individual taxation affect gender equality? Married couples can choose between individual or joint (withholding) income taxation in Germany. The 2013 withholding income tax reform introduced individual taxation as the default for newlywed spouses. This implied lower average and marginal tax rates for the secondary earner, typically the wife. I use newly available data for the universe of German taxpayers and leverage the default introduction as an exogenous change to the share of newlyweds choosing individual taxation. I establish two main results. First, the share of newlyweds choosing the individual tax schedule increases by 24% after the default introduction. Thus, the secondary earner faces lower average and marginal tax rates. Second, female labor income significantly increases in the post marriage years relative to before the default introduction. My findings suggest that a move from joint taxation towards individual taxation of spouses can improve gender equality in earnings.


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