This paper analyses the impact of tax reforms that decrease income tax progression in an equilibrium search model with wage bargaining and endogenous individual working time. The working time is either bargained together with the hourly wage (case 1) or determined solely by workers after bargaining over the wage (case 2). In both cases reducing tax progression increases working time of employed and, more interestingly, increases unambiguously wages and unemployment. Wages and unemployment rise more and working time and production less in case 1 compared to case 2; probably making case 2 countries best suited for such tax reforms