Comparing Households with Different Structures: The Problem of Equity

Abstract

Design of equitable tax and transfer schemes and analyses of the distribution of well-being among members of society are complicated by the fact that households differ in structure. During the 1970's, a major reexamination of the questions of optimal income tax progressivity and the horizontal equity of taxes has taken place following the seminal work of James Mirrlees; these analyses differ from earlier treatments of tax equity because of the recognition that individuals may value leisure time as well as income. This reexamination of tax equity has for the most part assumed a world of identically structured households with only one potential worker. The present paper surveys issues in tax equity and analyzes them allowing for one- and two-adult households which may differ in their work behavior.