The Taxation of Families: How Gendered (De)Familialization Tax Policies Modify Horizontal Income Inequality

Manuel Schechtl

doi:10.1017/s0047279421000404

Abstract

AbstractA welfare state’s tax system does not solely redistribute from rich to poor (vertical) but also between family types (horizontal). Different types of families are treated differently due to gendered (de)familialization policies in the tax code, such as joint filing for spouses or single-parent relief. In this study I aim to examine the tax system’s modification of horizontal income inequality between the six most prevalent family types of non-retiree households. To answer my research aim I draw on harmonized data from 30 countries provided by the Luxembourg Income Study (LIS). I estimate pre- and post-fiscal income inequality measured as between-family-type Theil indices. Using multivariate linear regression, I examine the association of the percentage change in inequality and the prevalence of family type-related tax characteristics. The results show that welfare states with familialization tax policies reduce less horizontal income inequality compared to welfare states without familialization tax policies. As familialization tax policies provide additional benefits for breadwinners with dependents, they discourage labour market participation of secondary earners and might exacerbate gender inequalities.

Highlights

In the light of the ongoing scientific discussion on rising inequality, many scholars have called for the welfare state to intervene
As Figure indicates, a higher level of taxation is associated with a greater reduction in inequality between family types, as expected in the first hypothesis
In this study, I have investigated the relationship between income taxes and the modification of horizontal income inequality between family types using harmonized data from countries in the Luxembourg Income Study (LIS)

Summary

Introduction

In the light of the ongoing scientific discussion on rising inequality, many scholars have called for the welfare state to intervene. Welfare states do not solely redistribute from rich to poor (vertical) (Bergh, ) and between groups, such as gender, race or different family types (horizontal) (Stewart, ). The formerly hegemonic married family household type may enjoy distributional benefits in some welfare states because of the rigidness of tax systems that still promote traditional male breadwinner family arrangements As long as the traditional married family pattern of the post-war era was the default social norm, diverging living arrangements seemed insignificant. It has been scholars in the gender studies tradition who have drawn attention towards horizontal family-type redistribution in order to understand implicit gender inequalities in social policy (Sainsbury, ; Sainsbury, ). Research on the direct link between horizontal inequality and taxation remains dominantly interested in the interaction of tax benefits and labour market participation (Bick and Fuchs-Schündeln, ; Buettner et al, ; Dingeldey, ; Figari et al, )

Methods

Results

Conclusion