Income Tax Design and the Desirability of Subsidies to Secondary Workers in a Household Model with Joint and Non-Joint Time∗

In this paper we analyze income tax design in a two member household labor supply model where time spent on consumption together by the two household members is valued differently from time spent apart. We treat consumption as a non excludable public good to members of the household; one example would be where all household members or one alone can watch TV. When jointly consumed, however, TV services are valued more highly than the same con-sumption undertaken separately. We use this model to numerically investigate the welfare implications of different tax structures. In sharp contrast to existing literature, our results suggest the desirability of subsidizing secondary worker’s labor supply. We also relate our discussion to existing individual-household tax unit literature. ∗We are grateful to Chris Robinson and Jim Davies for discussions and literature suggestions. Edgar Cudmore acknowledges support from the Social Sciences Research Council of Canad