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Tax Reform, Targeting and the Tax Burden on Women

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  • Patricia Apps

Abstract

In the early 1980’s Australia had a highly progressive, individual based income tax and families received support for dependent children in the form of universal family allowances. The introduction of income tests for child support payments based on family income (now in the form of Family Tax Benefit Part A), together with changes in the rate scale applying to personal income, have had the effect of replacing Australia’s progressive individual based income tax with a system that tends towards one of joint taxation under a rate scale that exhibits an inverted U-shaped profile – the highest marginal rates apply to average incomes, and to the incomes of the second earner in the family. This paper shows how the introduction of this new income tax system has shifted the overall burden of taxation towards families with two-earners on low and average wages and to working married mothers in particular as second earners. The paper proposes a return to a progressive individual based income tax and universal family payments for dependent children, for reasons of both fairness and efficiency, and argues for the elimination of policy instruments that create complexity and serve only to reduce the transparency of tax reform.

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Bibliographic Info

Paper provided by Centre for Economic Policy Research, Research School of Economics, Australian National University in its series CEPR Discussion Papers with number 609.

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Date of creation: May 2009
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Handle: RePEc:auu:dpaper:609

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

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References

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  1. Kathryn Shaw, 1994. "The Persistence of Female Labor Supply: Empirical Evidence and Implications," Journal of Human Resources, University of Wisconsin Press, vol. 29(2), pages 348-378.
  2. Apps, P.F. & Rees, R., 1998. "On the Taxation of Trade Within and Between Households," Papers 337, Australian National University - Department of Economics.
  3. Alberto Alesina & Andrea Ichino & Loukas Karabarbounis, 2011. "Gender-Based Taxation and the Division of Family Chores," American Economic Journal: Economic Policy, American Economic Association, vol. 3(2), pages 1-40, May.
  4. Apps, Patricia & Rees, Ray, 2001. "Household production, full consumption and the costs of children," Labour Economics, Elsevier, vol. 8(6), pages 621-648, December.
  5. Shaw, Kathryn L, 1989. "Life-Cycle Labor Supply with Human Capital Accumulation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(2), pages 431-56, May.
  6. Boskin, Michael J. & Sheshinski, Eytan, 1983. "Optimal tax treatment of the family: Married couples," Journal of Public Economics, Elsevier, vol. 20(3), pages 281-297, April.
  7. Patricia Apps, 2007. "Taxation And Labour Supply," CEPR Discussion Papers 560, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  8. Sandmo, Agnar, 1990. "Tax Distortions and Household Production," Oxford Economic Papers, Oxford University Press, vol. 42(1), pages 78-90, January.
  9. Sheshinski, Eytan, 1972. "The Optimal Linear Income-Tax," Review of Economic Studies, Wiley Blackwell, vol. 39(3), pages 297-302, July.
  10. Altug, Sumru & Miller, Robert A, 1998. "The Effect of Work Experience on Female Wages and Labour Supply," Review of Economic Studies, Wiley Blackwell, vol. 65(1), pages 45-85, January.
  11. Apps, Patricia, 1982. "Institutional inequality and tax incidence," Journal of Public Economics, Elsevier, vol. 18(2), pages 217-242, July.
  12. Mirrlees, James A, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Wiley Blackwell, vol. 38(114), pages 175-208, April.
  13. Schroyen, Fred, 2003. "Redistributive taxation and the household: the case of individual filings," Journal of Public Economics, Elsevier, vol. 87(11), pages 2527-2547, October.
  14. Susumu Imai & Michael P. Keane, 2004. "Intertemporal Labor Supply and Human Capital Accumulation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(2), pages 601-641, 05.
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