Australian Family Tax Reform and the Targeting Fallacy

Australian Economic Review, Vol. 43, No. 2, pp. 1-25, 2010

Sydney Law School Research Paper No. 10/44

36 Pages Posted: 8 May 2010 Last revised: 23 Oct 2010

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)

Multiple version iconThere are 2 versions of this paper

Date Written: May 5, 2010

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Over recent decades Australia's highly progressive, individual based taxation of families has been replaced by a system that tends towards joint taxation with an inverted U-shaped rate scale.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

Keywords: Income taxation, Family benefits, Time allocation, Labour supply, Household production, Discrimination

JEL Classification: D91, H24, H31, I38, J16, J22, K10, K30, K34

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

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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