 Why an Earned income tax credit program is a mistake for AustraliaAustralian Journal of Labour Economics (AJLE), 2002, vol. 5, issue 4, 549-568 Abstract: This 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. Keywords: Government programs; provision and effects of welfare programs Time allocation, work behaviour, and employment determination: other Nonwage labour costs and benefits; private pensions (fringe benefits, cost of social security, costs of hiring and firing) (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ozl:journl:v:5:y:2002:i:4:p:549-568 Access Statistics for this article More articles in Australian Journal of Labour Economics (AJLE) from Bankwest Curtin Economics Centre (BCEC), Curtin Business School Contact information at EDIRC. |
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