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Cut‐offs, Knock‐ons and Welfare Payment Taper Changes: An Evaluation of the July 2000 Tax and Welfare Changes for Lone Mothers

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  • ROBERT G. GREGORY
  • EVA KLUG
  • PREM J. THAPA

Abstract

High welfare withdrawal rates generate high effective marginal tax rates and work disincentives; but reducing withdrawal rates extends welfare to the better‐off. We analyse pension taper reduction effects for lone mothers subject to the Australian tax and welfare reforms of July 2000. The changes in work incentives were trivial. Taper reductions extended income support and provided larger family payments to high income lone mothers previously excluded from welfare. Approximately 90 per cent of the better‐off group now made eligible for income support had a long history of welfare reliance. The taper reduction encouraged them to stay on welfare longer.

Suggested Citation

  • Robert G. Gregory & Eva Klug & Prem J. Thapa, 2008. "Cut‐offs, Knock‐ons and Welfare Payment Taper Changes: An Evaluation of the July 2000 Tax and Welfare Changes for Lone Mothers," The Economic Record, The Economic Society of Australia, vol. 84(266), pages 291-309, September.
    • Handle: RePEc:bla:ecorec:v:84:y:2008:i:266:p:291-309
    DOI: 10.1111/j.1475-4932.2008.00492.x
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    References listed on IDEAS

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    1. Alan Duncan & Mark N. Harris, 2002. "Simulating the Behavioural Effects of Welfare Reforms Among Sole Parents in Australia," The Economic Record, The Economic Society of Australia, vol. 78(242), pages 264-276, September.
    2. Garry F. Barrett, 2002. "The Dynamics of Participation in the Sole Parent Pension," The Economic Record, The Economic Society of Australia, vol. 78(240), pages 1-17, March.
    3. Yi‐Ping Tseng & Roger Wilkins, 2003. "Reliance on Income Support in Australia: Prevalence and Persistence," The Economic Record, The Economic Society of Australia, vol. 79(245), pages 196-217, June.
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    Cited by:

    1. Hayley Fisher & Anna Zhu, 2019. "The Effect of Changing Financial Incentives on Repartnering," The Economic Journal, Royal Economic Society, vol. 129(623), pages 2833-2866.

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