Family size and optimal income taxation

Cremer, Helmuth;Dellis, Arnaud;Pestieau, Pierre
(2001)

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  • Cremer, HelmuthUCLouvain
    Author
  • Dellis, Arnaud
    Author
  • Pestieau, PierreUCLouvain
    Author
Abstract
This paper studies the role of family size in the design of optimal income taxation. We consider a second best setting where the government observes the number of children and the income of the parents but not their productivity. With a linear tax schedule the marginal tax rate is shown to decrease with the number of children, while the relationshipb etween the demogrant and family size appears to be ambiguous. With two ability levels, otpimal non-linear income tax implies zero marginal tax rates for the higher ability parents; low ability parents have positive marginal tax rates that decrease with family size.
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Cremer, H., Dellis, A., & Pestieau, P. (2001). Family size and optimal income taxation (CORE Discussion Papers 2001/21). https://hdl.handle.net/2078.5/128252