Family splitting versus joint taxation : a case-study

In this paper we compare two tax systems which may be used to introduce family-based taxation in a Region of Italy, Lombardy. The French-like tax system, which uses a family quotient, and a German-like tax system, which applies joint taxation and decreasing-in-income children allowances. Our comparison takes into account revenue neutrality, labour supply effects and different degrees of inequality aversion by using an abbreviated social welfare function a la Sen. Our results show that, although the family quotient performs relatively better in efficiency terms, welfare is unambiguously higher under the German-like tax system provided the social planner is to some extent inequality averse.