Will you civil union me? Taxation and civil unions in France

Although the tax system is not marriage neutral in many countries, it has been found to be only slightly significant in determining marriage decisions (Buffeteau and Echevin, 2003 and Alm and Whittington, 1995). This paper tests whether the tax system can alter the decision to contract a civil union, which is less binding than a marital contract. In 1999, France introduced civil union (pacs) as an alternative legal union to marriage. I assess the impact of taxation on the decision to contract a pacs using a difference-in-differences evaluation of the 2005 income tax reform for newly pacsed couples. As the control group is contaminated by the reform, I propose an original estimation method based on a difference-in-differences-in-differences setting to estimate bounds to the impact of the reform. My results find a positive and increasing impact of taxation on pacs rates, but also a change in the timing of pacs unions suggesting that taxation alters the decision to contract a pacs. In addition, I find a slightly significant impact of taxation on the decision to terminate a pacs.