Income Splitting and Women's Labor-Force Participation

Abstract

The federal personal income tax law allows married couples to split their joint income and be taxed as if each spouse earned half the income. This study uses data from the 1979 Michigan Survey of Income Dynamics to test the effect of income splitting on the labor-force participation of wives. The results of a probit estimation show that the elimination of income splitting would probably increase significantly the labor-force participation of married women.