Income splitting among the self‐employed

Abstract

Under individual taxation with progressive marginal tax rates, households in which the distribution of income is unequal benefit from attributing income to the lower income household member. Self-employment provides greater potential to 'split' income in this way because of the absence of a third party reporting income. Using the Canadian experience as a case study, this paper develops a unique estimator of the incidence of illegal income splitting among self-employed couples. The results suggest that the incidence of income splitting among self-employed men in Canada is non-trivial; but no evidence is found that self-employed women attribute income to their spouses. JEL classification: H26, H21, H31 J22Le fractionnement du revenu chez les travailleurs autonomes. Dans un régime fiscal qui a des taux marginaux d'imposition progressive des revenus, les membres d'un ménage dans lequel la répartition des revenus n'est paségale peuvent tirer profit de techniques pour attribuer du revenu au membre du ménage qui a le plus bas revenu. Le travail autonome fournit des possibilités encore plus grandes de fractionner le revenu parce qu'il n'existe pas un tiers qui fait rapport sur ces revenus. A partir du cas canadien, ce mémoire développe une manière d'estimer l'incidence du fractionnement illégal du revenu dans des couples de travailleurs autonomes. Les résultats suggèrent que l'incidence de fractionnement des revenus pour les hommes qui sont travailleurs autonomes au Canada n'est pas insignifiante; rien n'indique que les femmes qui sont travailleurs autonomes attribuent une portion de leurs revenusà leuŕ epoux.

Are Liquidity Constraints Holding Women Back? An Analysis of Gender in Self-Employment Earnings

“…There is some evidence that such splitting occurs in Canada. Schuetze (2006), analyzing wage and self-employment rates, reports results that are consistent with incorporated self-employed men in Canada attributing a portion of profits to their spouses.…”

New evidence on taxes and portfolio choice

“…This is an idea with a substantial pedigree (see for example, Card and Freeman, 1993.) The contrast between Canada's system of individual taxation and the U.S. system of joint taxation has recently been exploited by Schuetze (2006) to study income splitting among the self-employed. employ temporal variation.…”

Gender Identity, Coworking Spouses, and Relative Income within Households

“…There is evidence that self-employed couples may misreport their earnings to minimize the tax burden(Stephens and Ward-Batts, 2004, Schuetze, 2006, LaLumia, 2008, Kleven, Kreiner and Saez, 2009, Kabatek, van Soest and Stancanelli, 2014, Harju and Matikka, 2016.…”