Excerpted from Capital Ideas
Memo to Congress: Tax Couples as Individuals
When people find partners with similar earnings ability, the best tax system is one in which a couple's incomes are taxed separately, according to Alexander P. Frankel,
Excerpted from Capital Ideas
Memo to Congress: Tax Couples as Individuals
When people find partners with similar earnings ability, the best tax system is one in which a couple's incomes are taxed separately, according to Alexander P. Frankel, assistant professor of economics and Richard N. Rosett Faculty Fellow. His research, "Taxation of Couples under Assortative Mating," is scheduled for publication in American Economic Journal: Economic Policy.
Economists have long studied how the tax system could be used to fight inequality. To some, an optimal tax policy redistributes income from the rich to the poor by taxing high earners more. At the same time, it makes sure not to blunt incentives to work by imposing too high a tax rate.
When low-earning people tend to marry each other, a policy that links their incomes and tax rates becomes expensive because it results in a high level of gover