Removing Poverty Traps: Taxation and Welfare Reform in Australia

M. Cashel and P. A. McGavin

The Economic and Labour Relations Review, 1992, vol. 3, issue 2, 98-114

Abstract: This article uses data on the interactions of income taxation and state welfare transfers on effective marginal tax rates (EMTRs) in Australia to argue policy reforms for removing poverty traps created by high EMTRs. This highlights the need for state welfare and income taxation reforms to target those elements of income taxation and social welfare interaction that are most significant for high EMTRs and for high EMTRs extending across wide incomes ranges. Proposed welfare changes involve simultaneous reductions in base-level state welfare transfer payments, along with eligibility for supplementary transfer payments for able persons that are proportional to market labour activity. Proposed taxation changes include removal of distinctions between taxable and tax-exempt state welfare transfers and a gradually-progressive revised taxation scale.

Date: 1992
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Persistent link: https://EconPapers.repec.org/RePEc:sae:ecolab:v:3:y:1992:i:2:p:98-114

DOI: 10.1177/103530469200300205

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