The Politics of Couples’ Taxation: Explaining the Shift to the Individual Tax Unit in OECD Countries

Tax policies are not just financial matters; they mirror and shape societal structures. The joint tax unit, under which couples are taxed as a unified entity, exemplifies this by raising marginal tax rates for secondary earners, who are predominantly women. This incentivizes them to remain at home, reflecting a patriarchal understanding of labor that expects women to primarily engage in unpaid care work in the household. A shift to individual tax units, enabling separate taxation of spouses' incomes, alleviates women from work disincentives, boosting female labor supply. This fosters gender equality, granting women economic independence and autonomous work decision-making, free from state policy disincentives. Since the 1970s, many countries shifted from joint to individual taxation, including Austria, Italy, Sweden, and the UK. However, major countries like the US, France, Germany, and Switzerland still adhere to joint taxation. In this paper, I used a fuzzy-set QCA to examine the puzzling adoption patterns of the individual tax unit among 18 OECD countries. The findings show that institutional constraints, such as the institutional stickiness of the splitting method as well as veto points, were especially relevant for tax unit change. Countries that employed the aggregation method, which entails fewer political costs for reform compared to the splitting method and had fewer veto points were more inclined to shift to the individual tax unit. The strength of left parties, high levels of women in parliament, progressive family structure, or female labor demand can, however, also serve as additional push factors. These findings enrich the literature on tax and welfare state reforms from a gender perspective, shedding light on the overlooked politics surrounding couples' taxation.