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Author: Eissa, Nada
Resulting in 1 citation.
1. Eissa, Nada
Hoynes, Hilary Williamson
Tax and Transfer Policy, and Family Formation: Marriage and Cohabitation
Working Paper, Department of Economics, University of California, Berkeley and NBER, December 2000.
Cohort(s): NLSY79
Publisher: Department of Economics, University of California, Berkeley
Keyword(s): Divorce; Earned Income Tax Credit (EITC); Family Formation; Family Income; Family Size; Family Studies; Marriage; Taxes

Permission to reprint the abstract has not been received from the publisher.

The American family has gone through major transformations over the past 4 decades. Over this period, the age of first marriage, the rate of divorce, and the rate of out-of-wedlock births have risen dramatically. Not only have individuals delayed marriage, they have increasingly forgone marriage altogether: the proportion of those of those reporting never having married has increased at older ages, especially among the less educated.

Several explanations have been given for this transformation, including declining labor market opportunities for less skilled males, rising employment of women, legalization of abortion, changing norms and the welfare system. In fact, these changes have sustained the popular criticism that public assistance programs undermine the traditional family through their adverse incentives for creating and maintaining two- parent families. Indeed, empirical evidence supports the view that welfare has some role in family structure decisions (Moffitt 1998, Hoynes 1997b).

Less recognized is the potential effect of the tax system on family formation. Unlike most other industrialized countries, the U.S. federal income tax code is based on family rather than individual income (Engelhardt and Pechman 1990). Because the tax schedule is progressive, it is not marriage neutral. By nonmarriage neutrality, it is meant that the tax liability for a married couple differs from the total tax liability of 2 unmarried individuals with the same total income and family size. Unlike the transfer system, the federal (and state) income tax code can either tax or subsidize marriage depending on the size and earnings of the family. Recently, there has been renewed interest in the impact of the tax system on the so-called “marriage penalty”. Proposals to address this "penalty" include increasing the size of the 15 percent tax bracket for married couples, a deduction for secondary earnings in the households and increasing the maximum income for a marri ed couple to be eligible for the Earned Income Tax Credit . […]

This paper is organized as follows. Section 2 presents a brief overview and discussion of tax and transfer schemes and the implications of marriage. Section 3 presents the data and descriptive evidence on the tax and transfer consequences of marriage. The conceptual and empirical frameworks typically used for marriage analysis are presented in section 4. Our regression results are in section 5. We present our conclusions in section 6.

Bibliography Citation
Eissa, Nada and Hilary Williamson Hoynes. "Tax and Transfer Policy, and Family Formation: Marriage and Cohabitation." Working Paper, Department of Economics, University of California, Berkeley and NBER, December 2000.