Tax policies are not neutral – even policies that prioritize vertical redistribution generate inequality and cement traditional divisions of labor.

In this study, I have investigated the relationship between income taxes and the modification of horizontal income inequality between family types using harmonized data from 30 countries in the LIS. I have argued that taxation is a genuine aspect of social policy, which merits the attention of sociologists interested in comparative welfare state research. Throughout the analysis it became evident that income taxation is an essential instrument of horizontal inequality modification. In line with my expectations, I showed that the average effective tax rate was positively correlated with the reduction in income inequality between family types. This also held for tax progressivity when controlling for tax level. I then examined the role of familialization tax policies, which foster the individual’s dependency on family context. These familialization policies in the tax code were found to be negatively associated with the welfare state’s capacity to reduce income inequality between family types. As expected, joint assessment of married couples in general and income splitting in particular seemed to diminish the redistributional power substantially. The empirical findings suggest that the prevalence of joint filing cuts the tax-induced reduction in income inequality between types of families by almost half. On the other hand, de-familialization policies appeared to strengthen individual autonomy and mitigate inequality. However, I did not find consistent evidence that single-parent allowances enhance redistribution between family types. These findings are consistent with previous research suggesting that tax allowance policies benefit middle and higher income households (Avram, Reference Avram2018; Stebbing and Spies-Butcher, Reference Stebbing and Spies-Butcher2010). Inverting the progressive structure of the income tax, fiscal benefits for married couples at the upper income deciles reduce the distributive potential of income taxation. However, it seems that these familialization tax policies in general not only impede effective redistribution, but also hinder individual autonomy and gender equality (Orloff, Reference Orloff1993; Saraceno, Reference Saraceno2016), but that, in the case of taxation, these policies may create inequalities between types of families at the same time. Welfare states without joint filing not only have significantly higher levels of between-family-type inequality reduction but greater individual autonomy due to individual filing as a critical de-familialization policy. At the country level, this interpretation may imply a lose-lose situation of family dependency and income inequality. In this context, the individual is thus confronted with economically beneficial family dependency at the cost of a loss of individual autonomy. As familialization policies provide additional benefits for breadwinners with dependents, they discourage more autonomous individual arrangements. Second and as widely discussed within the literature on labour market incentives for secondary earners (Jara Tamayo and Popova, Reference Jara Tamayo and Popova2020), familialization policies in the tax code potentially hinder female labour market participation. The tax code promotes a strong breadwinner model in most countries with joint filing and progressive income taxation due to lower marginal tax rates for the primary earner. Again, while this is widely known to exacerbate gender inequality (Sainsbury, Reference Sainsbury1999; McCaffery, Reference McCaffery, Martin, Mehrotra and Prasad2009), as the study at hand indicates, it is also associated with greater income inequality between family types at the macro level. In some countries, however, the beneficial treatment of married couples also applies to same sex couples implying similar incentives for their division of labour. This study is limited in several ways. First, the countries were not selected randomly. Nevertheless, external validity should be substantial due to the diverse set of countries. Second, the dependent variable measures inequality between the six most prevalent family types, but this fits some countries better than others. In countries with a high share of multi-generational households, the findings do not reflect the actual situation of many families. Furthermore, population characteristics and cross-country differences in the reliance on social security contributions may lead to an underestimation of the relevance of tax benefits. Therefore, the relationship of interest may be stronger than indicated in this study. Lastly, information on taxes may be inaccurate. However, in the LIS, the tax information from the countries used in this study is mainly derived from register data and/or national microsimulations and should, hence, be sufficiently reliable. The social and political implications are, however, manifold. As this article has shown, these tax mechanisms may foster horizontal inequality. In the light of rising inequality and escalating public debt, it is debatable whether these tax expenditures are desirable or affordable. For the public budget, tax benefits essentially represent a loss of revenue. Hence, the forgone tax revenue could be used for social transfers to the poor. In other words, politically these familialization tax policies seem to cut public revenue and foster inequality, while socially they appear to promote family dependency and a traditional division of labour. This study contributes to our understanding of the consequences of institutionalized differences in the tax treatment of family types. It sheds light on the pivotal yet largely overlooked role of taxation when scrutinizing horizontal inequality between family types. Focusing on (de-)familialization tax policies with different consequences for inequality, this study emphasizes the role of family tax policy as a form of social policy.