Miscellaneous 1987

Tax and social security reform: An analysis of equity and disincentive effects

Source: Australian Tax Research Foundation

Published Date: 1 Jan 1987


This paper examines the equity and disincentive effects of changes to tax and social security which involve reducing the progressivity of marginal tax rates on income and switching to the combined income of couples as the basis for taxation and targeted transfers. The results suggest that tax-transfer schemes containing less progressive marginal rates and joint income targeted transfers would lead to much less progressive average tax rates and cause a substantial shift in the tax burden to working married women.

Similar findings are obtained for joint taxation and income splitting schemes of the kind proposed by the Federal Opposition. The analysis of disincentive effects indicates that the schemes would also be extremely costly in terms of losses in earnings and government revenue.

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Miscellaneous 1987

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