Family taxation: An unfair and inefficient system

Patricia Apps, The University of Sydney and Australian National University


This paper presents an analysis of the 2006–2007 family tax system. The results show that most families are now taxed, in effect, on the basis of joint income. Through a succession of reforms the Howard Government has shifted the tax burden to two-earner families to such an extent that many now pay close to the same amount of tax as a family in which only one parent need work to earn the same income while the other works full-time at home. As a consequence, the incomes of second earners in low and average wage families are taxed effectively at the highest average rates in the economy. The study explains why the system is unfair and seriously damaging for the economy in its impact on female labour supply in an ageing population. On the basis of the results, the paper argues for a return to a progressive individual income tax system, to improve support for families and to raise female participation and productivity.

Patricia Apps <> is Professor of Public Economics, Faculty of Law, The University of Sydney, Adjunct Professor, ANU and UTS, 2006 President of the European Society for Population Economics (ESPE), Research Fellow of IZA (Germany) and CHILD (Italy), and a Fellow of the Academy of Social Sciences in Australia. Her research covers a wide range of areas in Public Sector Economics and she is a major contributor to the new literature on the economics of the household. Her work has appeared in leading international journals in economics and specialist journals in the field. The author thanks Glenn Jones and Elizabeth Savage for detailed comments and Margi Wood for her contribution to programming and data management. The research was supported by an Australian Research Council DP Grant.

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