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Effective Marginal Tax or Benefit? The Medicare Levy and Australian Defence Personnel

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  • Elizabeth Manning

Abstract

Does the phase‐in of the Australian Medicare levy as family income increases always contribute to a high effective marginal tax rate (EMTR)? Or are there circumstances in which the targeted nature of the Medicare levy in Australia can result in an effective marginal benefit (EMB) to family income as the income of the secondary income earner increases? This paper explains the concept of an EMB, providing examples and estimating the impact across different income ranges. The paper concludes that the existence of EMBs may lessen the impact of high EMTRs to some extent for the families affected. This is of particular importance to Australian Defence Force families in which the secondary income earner moves in and out of employment as the family relocates due to the defence posting cycle.

Suggested Citation

  • Elizabeth Manning, 2021. "Effective Marginal Tax or Benefit? The Medicare Levy and Australian Defence Personnel," Economic Papers, The Economic Society of Australia, vol. 40(2), pages 167-172, June.
    • Handle: RePEc:bla:econpa:v:40:y:2021:i:2:p:167-172
    DOI: 10.1111/1759-3441.12303
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    1. Zhe An & Zhe Cao & Zhian Chen & Donghui Li, 2020. "Does individualistic culture impact operational risk?," European Financial Management, European Financial Management Association, vol. 26(3), pages 808-838, June.
    2. ., 2020. "Why do individuals want to be entrepreneurs?," Chapters, in: Entrepreneurial Intention, chapter 3, pages 34-53, Edward Elgar Publishing.
    3. Campbell, H. F. & Bond, K. A., 1997. "Effective Marginal Tax Rates in Australia," Economic Analysis and Policy, Elsevier, vol. 27(2), pages 151-158, September.
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