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Working Paper Abstract

118. "Individual vs family taxation: an analysis using TABEITA04"
           by Marco Cavalli, Carlo V. Fiorio 

Abstract

In this paper we analyze whether Italian families, and especially those with
children, would benefit from a tax system defined on a family rather than an
individual tax unit. This analysis is performed using TABEITA04, the tax-benefit
microsimulation model developed at Econpubblica on a representative sample
of 2004 Italian households.
Results show that family with kids would, on average, lose from such a reform
as they are better off with the actual individual tax system, which provides
generous tax credits for family burdens. The simulated reform could also be
extremely costly in terms of labour force participation of spouses: in our
sample, over 80% of spouses are not working and nearly 40% of them would
face an increased marginal tax rate if the family tax unit was introduced.
Those benefiting the most would be couples without children where both
spouses are working, who are not enjoying any tax credit in the current tax
system.

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