Économie et Statistique n° 401 - 2007 Cohabitees and income tax in France - To marry or not to marry: can tax law be a deciding factor? - Family components of income tax in Germany and in France: pertinent differences
Cohabitees and income tax in France
French tax laws do not allow unmarried couples to declare their income jointly. Thus they lose out, when compared to married couples, on the married couples' tax relief, a system which can decrease a couple's tax liability. A close look at the laws shows that the married couples' tax relief has the fullest effect when the structure of the spouses' contribution to the total is significantly asymmetric. It pinpoints the provisions that reduce the effectiveness of the married couple's tax allowance: the graduated relief and the minimum payment threshold. Marriage can then result in financial loss. In some cases, the fact that the less well-off of the two partners no longer qualifies for the employment bonus when married can also cause a loss. To reach a conclusion on the effects of marriage in terms of loss or profit, it is important to understand the actual frequency of occurrence of the corresponding configurations of couples and to simulate marriage for unmarried couples: Myriade, a microsimulation model based on the real situation of couples in 2005, shows that non-marital union, even if it is widespread, offers the most possibilities for people in the lowest income brackets. Simulating the marriage of unmarried couples shows a small advantage to marriage: this is mostly explained by the asymmetry in resources and a lower standard of living, both lower in unmarried couples.