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 InfoPaper provided by Centre for Economic Policy Research, Research School of Economics, Australian National University in its series CEPR Discussion Papers with number 431.
Length: 28 pages
Date of creation: Jun 2001
Date of revision:
Other versions of this item:
- Patricia Apps, 2002. "Why an Earned income tax credit program is a mistake for Australia," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 5(4), pages 549-568, December.
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
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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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