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Australian Family Tax Reform and the Targeting Fallacy


Patricia F. Apps


The University of Sydney Law School; IZA Institute of Labor Economics

Ray Rees


Ludwig Maximilian University of Munich - Faculty of Economics; CESifo (Center for Economic Studies and Ifo Institute)

May 5, 2010

Australian Economic Review, Vol. 43, No. 2, pp. 1-25, 2010
Sydney Law School Research Paper No. 10/44

Abstract:     
Over recent decades Australia's highly progressive, individual based taxation of families has been replaced by a system that tends towards joint taxation with an inverted U-shaped rate scale.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, K34


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Date posted: May 8, 2010 ; Last revised: October 23, 2010

Suggested Citation

Apps, Patricia F. and Rees, Ray, Australian Family Tax Reform and the Targeting Fallacy (May 5, 2010). Australian Economic Review, Vol. 43, No. 2, pp. 1-25, 2010; Sydney Law School Research Paper No. 10/44. Available at SSRN: https://ssrn.com/abstract=1601088

Contact Information

Patricia F. Apps (Contact Author)
IZA Institute of Labor Economics
P.O. Box 7240
Bonn, D-53072
Germany

The University of Sydney Law School ( email )
Faculty of Law, New Law Building F10
The University of Sydney
Sydney, NSW 2006
Australia
+61 2 9351 0241 (Phone)
+61 2 9351 0200 (Fax)

Ray Rees
Ludwig Maximilian University of Munich - Faculty of Economics ( email )
Munich, D-80539
Germany
CESifo (Center for Economic Studies and Ifo Institute)
Poschinger Str. 5
Munich, DE-81679
Germany

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