The aging of the population in Germany has led to growing concerns among politicians about the economic situation of households with children. This is also reflected in the recent tax policy debate on reforming the taxation of families and married couples. The purpose of this paper is threefold. We use a microsimulation approach to analyse how various reforms of family taxation would affect the incomes of families compared to singles and married couples without children. Moreover, we address the distributional effects across different income deciles. Finally, we quantify tax revenue effects as well as possible consequences for labour supply. We focus on limited real income splitting systems. The simulation results show that limited real income splitting produces rather moderate vertical distributional effects, compared e. g. with the joint family income splitting of the French type. Furthermore real income splitting would lower the marginal tax rate on the second earner's income, creating incentives to take up employment. It would also generate additional tax revenue.
