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Taxation and labour supply

Published on 01 Jul 07 by "AUSTRALIAN TAX FORUM" JOURNAL ARTICLE

Cross country comparisons of lifecycle labour supplies show that female hours of market work are significantly lower in Australia than in other comparable OECD countries, notably, the US, UK and Sweden. This paper argues that an explanation can be found in the rate structure of the Australian family income tax system, in combination with a poorly developed and costly childcare sector. a detailed analysis of marginal and average tax rates shows how various policy instruments are used to set rates on the income of a second earner, typically the female partner, that reduce her net wage to a level that makes it difficult to finance childcare from the additional income. The system is also shown to be unfair. The paper proposes a return to a progressive individual income tax, with universal family benefits, together with the development of a high quality, education oriented, public sector childcare system.

Author profile:

Patricia APPS
Patricia Apps is Professor of Public Economics in the Faculty of Law, University of Sydney, Adjunct Professor in the Economics Program, Research School of Social Sciences, Australian National University, Canberra, Adjunct Professor at the University of Technology, Sydney, and a Research Fellow at IZA
Current at November 2013
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