Mary Ann Bronson, Georgetown University

Taxation and Household Decisions: an Intertemporal Analysis

Abstract

We evaluate the effect of different taxation systems on choices and welfare. We start by providing descriptive evidence that distinct taxation systems create different incentives for primary and secondary earners and that these incentives affect important outcomes. We then develop and estimate using U.S. data a model in which single and married individuals make decisions on labor supply, household production, human capital accumulation, consumption, savings, marriage, and divorce. Lastly, we use the model to evaluate three tax policies that have been frequently debated: a shift from a joint to an individual taxation system; the introduction of a secondary earner deduction in a joint taxation system; and the addition of child care subsidies to a joint and to an individual taxation system. We find that all three policies have substantive effects on people's choices and welfare, with secondary earners being affected the most. Their labor force participation and labor supply increases at the expenses of lower hours devoted to household production, they accumulate more human capital, their intra-household decisions power increases, and they enjoy higher levels of welfare.

Mary Ann Bronson is Assistant Professor of Economics at Georgetown University.
Her main research areas is Labor Economics, Applied Microeconomics. She is currently working on joint research projects on  “Individual Taxation and Lifecycle Labor Supply” (with Maurizio Mazzocco), “Work-Family Flexibility Policies in a General Equilibrium Model” (with Jim Albrecht, Susan Vroman and Peter Skogman Thoursie), “Wage Growth Within and Across Firms” (with Dan Cao) , ”The Lifecycle Wage Growth of Men and Women: Explaining Gender Differences in Wage Trajectories” (with Peter Skogman Thoursie) and  “Degrees are Forever: Marriage, Educational Investment, and Lifecycle Labor Decisions of Men and Women”