The Personal Income Tax and Family Labor Supply

THE ANALYSIS OF FAMILY LABOR SUPPLY PROVIDES A USEFUL VEHICLE FOR ANALYZING THE SPECIAL EFFECTS OF PERSONAL INCOME TAXES. PREDICTION IS GIVEN TO LABOR SUPPLY RESPONSE OF FAMILIES WHOSE GROSS INCOME FALLS IN A REGION WHERE MARGINAL TAX RATES ARE CONSTANT. LABOR SUPPLY DEPENDS ON THE STRUCTURE AS WELL AS THE SIZE OF MARGINAL TAX RATES. AT LEVELS OF FAMILY INCOME, WHERE MARGINAL TAX RATES CHANGE, FAMILY LABOR SUPPLY FALLS ON 'CONSTANT EARNINGS' SUPPLY RELATIONSHIPS ALONG WHICH EARNINGS ARE FIXED BUT THE MIX OF HOURS SUPPLIED BY VARIOUS FAMILY MEMBERS CAN ONLY BE DETERMINED FROM THE FAMILY UTILITY FUNCTION. THE FINAL EFFECT OF GIVEN MARGINAL TAX RATES ON LABOR SUPPLY DEPENDS ON THE ENTIRE STRUCTURE OF THE PERSONAL INCOME-TAX. THIS STRUCTURE DETERMINES THE INCOME TRANSFER EFFECTS ASSOCIATED WITH ANY GIVEN MARGINAL TAX RATE. GRAPHS.