The politics of married couples' taxation: understanding the shift to the individual tax unit

Tax policies mirror and shape societal structures. The joint tax unit, for instance, raises marginal tax rates for secondary earners, mostly women, creating a strong disincentive to work. A shift to the individual tax unit, which allows spouses' incomes to be taxed separately, significantly impacts women's work decisions and gender equality. Since the 1960s, numerous countries have shifted to the individual tax unit, yet major economies like the USA and Germany remain reluctant. In this paper, I used a fuzzy-set QCA to examine the puzzling adoption patterns of the individual tax unit among 19 Western democracies. The findings show that the institutional stickiness of the splitting method – whose reform is associated with higher political costs – is especially relevant for tax unit reform. Countries that used aggregation instead of the splitting method were more inclined to shift to the individual tax unit. High shares of women's political representation, female labor demand, strong feminist movements and strong left parties can, however, serve as additional drivers. These findings contribute to the literature on tax and welfare state reforms, which has so far neglected the politics of married couples' taxation.