Australian Family Tax Reform and the Targeting Fallacy
Patricia F. Apps
University of Sydney - Faculty of Law; Institute for the Study of Labor (IZA)
Ludwig-Maximilians-Universität Munich - Faculty of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
May 5, 2010
Australian Economic Review, Vol. 43, No. 2, pp. 1-25, 2010
Sydney Law School Research Paper No. 10/44
Over recent decades Australia's highly progressive, individual based taxation of families has been replaced by a system that tends towards joint taxation with an inverted U-shaped rate scale. The reform has been implemented by introducing family income targeted child payments (now Family Tax Benefit Part A) and by lowering tax rates on higher incomes. The new system has shifted the burden of taxation towards two-earner families on low and average wages and, in particular, to working married mothers as second earners. For reasons of fairness and efficiency, we propose returning to more progressive individual taxation and universal family payments, and the elimination of tax instruments that create complexity in order to reduce transparency.
Number of Pages in PDF File: 36
Keywords: Income taxation, Family benefits, Time allocation, Labour supply, Household production, Discrimination
JEL Classification: D91, H24, H31, I38, J16, J22, K10, K30, K34Accepted Paper Series
Date posted: May 8, 2010 ; Last revised: October 23, 2010
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