Elena Herold

Joint taxation of couples is often criticized for distorting labor supply and reinforcing household income inequality, particularly by disincentivizing secondary earners. Yet, empirical evidence is limited, as switching to joint taxation is typically endogenous and observed responses among different-sex couples are shaped by gender norms. We study the 2013 extension of joint income taxation to same-sex civil partners in Germany to isolate how tax incentives influence household income allocation. Using administrative tax return data on the universe of filers, we provide the first large-scale evidence on same-sex couples in Germany. We find that joint taxation increases within-couple inequality, primarily through reduced earnings of secondary earners. The partner pay gap rises by 4.1 percentage points - a 12.8% increase relative to the pre-reform level. Estimated tax elasticities are statistically significant but smaller than those for women in different-sex couples. However, they become insignificant when estimated within relative earner groups, suggesting that responses reflect increased inequality within couples rather than individual responses to marginal tax changes. Additionally, we show that same-sex couples are less likely than different-sex couples to choose withholding schemes that reinforce income differences between partners. Our findings suggest that joint taxation increases intrahousehold inequality, especially when incentives align with gender norms and there is scope for specialization.