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
To marry or not to marry: can tax law be a deciding factor?
In France, the income tax system for married couples relies on a joint income statement made to the tax administration (similar to an income self assessment form), which is commonly known for allowing tax savings to married couples on the basis of a progressive tax band system. In reality, a range of tax allowances for low income households are added to this joint statement system and modify its effects. Indeed, a deeper analysis of the French income tax system reveals that for some couples' income profiles, it might even be more advantageous to stay unmarried. However, the relevance of this study depends on how significant the number of people in each situation is, whether their tax burden is positively or negatively impacted when being married. The number of households within each category shows the bias caused by the joint declaration system for married and unmarried couples: in 2004, although the majority of couples were better off when married, dual-income couples with average incomes found themselves mainly penalised by marriage since they could only benefit once from some of the low income tax allowances. On the other hand, single-income couples represent a large number of those who gain from being married since they benefit most from the joint income statement system. Finally, it is possible to measure the real costs and benefits when moving from an unmarried to a married status and vice versa, using real data: benefactors from separate taxation represent nearly one in four couples while nearly 30% of couples with one or two children benefit from being unmarried. Those who benefit from being married are mainly single-income couples. Couples with the highest incomes have the most to gain from being married.