Why an Earned income tax credit program is a mistake for Australia
AbstractThis paper examines the distributional and efficiency effects of an Earned Income Tax Credit (EITC) program of the kind being strongly advocated for Australia by a number of economists. The paper presents an empirical analysis of the Family Tax Credit proposed by the Australian Labor Party at the time of the 1998 election, as a case study. The results show that, due to the structure of effective tax rates implied by the program, introducing such a system would lead to a large shift in the overall burden of taxation to low and median wage two earner families. Drawing on the findings of empirical research on behavioural responses to taxes, the paper goes on to explain why the program can also be expected to lead to a fall in labour supply and household saving. Thus there is reason to be critical of the impact of the policy both on economic growth and on equity of the income distribution.
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Bibliographic InfoArticle provided by Bankwest Curtin Economics Centre (BCEC), Curtin Business School in its journal Australian Journal of Labour Economics.
Volume (Year): 5 (2002)
Issue (Month): 4 (December)
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Postal: GPO Box U1987, Perth WA 6845
Web page: http://business.curtin.edu.au/research/publications/journals/ajle/
More information through EDIRC
Government programs; provision and effects of welfare programs Time allocation; work behaviour; and employment determination: other Nonwage labour costs and benefits; private pensions (fringe benefits; cost of social security; costs of hiring and firing);
Other versions of this item:
- Patricia Apps, 2001. "Why an Earned Income Tax Credit Program is a Mistake for Australia," CEPR Discussion Papers 431, Centre for Economic Policy Research, Research School of Economics, Australian National University.
- I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
- J29 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Other
- J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
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- Patricia Apps & Ray Rees, 2005.
"Gender, Time Use, and Public Policy over the Life Cycle,"
Oxford Review of Economic Policy,
Oxford University Press, vol. 21(3), pages 439-461, Autumn.
- Apps, Patricia & Rees, Ray, 2005. "Gender, Time Use and Public Policy over the Life Cycle," IZA Discussion Papers 1855, Institute for the Study of Labor (IZA).
- Patricia Apps & Ray Rees, 2005. "Gender, Time Use and Public Policy Over the Life Cycle," CEPR Discussion Papers 500, Centre for Economic Policy Research, Research School of Economics, Australian National University.
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