Question

Country A started to allow married couples to file their incomes separately regardless of the sources of income since 2015. Therefore, this system satisfies (a), (b) and (c) of the following conditions:

(a) The income tax should embody increasing marginal tax rates.

(b) The tax system should be marriage neutral, namely two individuals’ tax burdens should not change when they marry.

(c) Families with equal incomes should pay equal taxes.

Answer 1

Country A started to allow married couples to file their incomes separately regardless of the sources of income since 2015. This means that the couples now can file income tax separately and need not file together. If the incomes of both the individuals are added together than it will show a higher level of income and has to pay a high rate of tax, but now they will show their incomes separately and hence the level of income will be seem to be smaller and hence they will pay a smaller tax rate, which will be same as they used to pay before marriage.

So this tax system satisfies the conditions, - (b) " The tax system should be marriage neutral", namely two individual's tax burden should not change when they marry. This is because according to this system couples are allowed to file their incomes separately and hence this is same process as they have done before marriage.

If we look at condition (a) The income tax should embody increasing marginal tax rates , this means that with every single increase in income the tax must increase, but in the above system we are not talking about increase in income. So we can't say whether this system will satisfy the condition or not.

If we look at condition (c) Families with equal incomes should pay equal taxes. This condition do not be satisfy the condition because a family may consists of different incomes and the sum of their incomes may be same but individuals incomes may be very different in some families and almost same in other families so income tax will also differ according to difference in income.