Agathe Simon (ESRI) – From joint to individual: The distributional and labour supply effect of tax individualisation in Ireland

This paper evaluates the redistributive and labour supply effects of transitioning from a partially joint to a fully individualised income tax system in Ireland. The current system benefits married couples by allowing tax band and credit sharing but disincentivises secondary earners (typically women) from working. Using the microsimulation model for Ireland, SWITCH, we estimate that a fully individualised tax system would lead to income losses increasing with income level. While a fixed poverty line suggests a slight rise in at-risk-of-poverty (AROP) rates, a floating poverty line reverses this effect as the threshold falls post-reform. Linking the microsimulation to a structural labour supply model, we find that individualised taxation increases married women’s labour supply, therefore enhancing their economic independence.