The Optimal Income Taxation of Couples1

ing from correlation in spouse characteristics (assortative matching) allows us to isolate the implications for the optimal tax system of the interaction between spouses occurring through the social welfare function. In Section 4, we examine numerically how assortative matching affects our results. To establish an intuition on the optimal form of jointness, it is helpful to start by considering a tax reform introducing a little bit of jointness around the optimal separable tax system. In particular, for the work cost model, we will argue that the optimal separable schedule can be improved by introducing a little bit of negative jointness. For the home production model, the arguments can be reversed to show that a little bit of positive jointness is welfare improving. A separable schedule is one where T ′ 0 ≡ T ′ 1 and hence T1−T0, q̄, and P (q̄) are constant in n. In the work cost model, we would have T1−T0 > 0 due to the property g0−g1 > 0. As discussed above, this property follows from the fact that, at given n, being a two-earner couple is a signal of low work costs and being better off than one-earner couples. Moreover, under assumptions 2 and