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Why the five economists' plan for a "wage-tax trade-off" is a mistake for Australia

Apps, Patricia

Description

This paper presents an analysis of the Five Economists’ plan for a “wage-tax trade-off”, combining an EITC program with a freeze on award wage increases, as a policy package for reducing unemployment. The study identifies the changes in effective tax rates implied by the EITC program and shows that, when combined with a wage cut for the low paid, the proposed plan will increase inequality. Drawing on the findings of empirical research on behavioural responses to taxes, the study then goes on...[Show more]

dc.contributor.authorApps, Patricia
dc.date.accessioned2003-04-02
dc.date.accessioned2004-05-19T06:46:27Z
dc.date.accessioned2011-01-05T08:34:23Z
dc.date.available2004-05-19T06:46:27Z
dc.date.available2011-01-05T08:34:23Z
dc.date.created2002
dc.identifier.urihttp://hdl.handle.net/1885/40239
dc.identifier.urihttp://digitalcollections.anu.edu.au/handle/1885/40239
dc.description.abstractThis paper presents an analysis of the Five Economists’ plan for a “wage-tax trade-off”, combining an EITC program with a freeze on award wage increases, as a policy package for reducing unemployment. The study identifies the changes in effective tax rates implied by the EITC program and shows that, when combined with a wage cut for the low paid, the proposed plan will increase inequality. Drawing on the findings of empirical research on behavioural responses to taxes, the study then goes on to show that the plan can be expected to reduce the efficiency and growth of the economy, due to disincentive effects on family labour supply, saving and fertility. The structure of the plan is found to have much in common with ongoing labour market and tax-benefit reforms. Both are identified as policy directions that are not in the interests of Australia, either domestically or within the context of globalisation.
dc.format.extent249438 bytes
dc.format.mimetypeapplication/pdf
dc.language.isoen_AU
dc.subjecttaxation
dc.subjectwelfare
dc.subjectglobalization
dc.titleWhy the five economists' plan for a "wage-tax trade-off" is a mistake for Australia
dc.typeWorking/Technical Paper
local.description.refereedno
local.identifier.citationmonthapr
local.identifier.citationyear2002
local.identifier.eprintid1110
local.rights.ispublishedyes
dc.date.issued2002
local.contributor.affiliationCEPR, RSSS
local.contributor.affiliationANU
local.citationDiscussion Paper no.446
CollectionsANU Research Publications

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