Parents with children under 18 can split their incomes for tax purposes: one spouse may shift up to $50,000 to the other in order to lower their combined income taxes. Suppose this policy is implemented in Hibernia, where the tax structure is 20 percent of income up to $30,000, and 40 percent of all income in excess of $30,000. The table below gives the incomes of three married couples. Alyss and Will have a 6-year-old daughter, while Paulina and Halt have an 18-year-old son, and Cassandra and Horace are childless. Using the incomes in the table, compare the total tax paid by each couple before and after the tax proposal.
Using your results, discuss the merits of the proposal in terms of principles 2 and 3 discussed in the chapter (where you should consider the idea of “child neutrality” in place of “marriage neutrality”).