Canberra, Friday 15 June, 2001
Criticism of proposed 'Earned Income Tax Credits'
An economist at The Australian National University has warned that if
the proposed policy program of Earned Income Tax Credits (EITC) is introduced
in Australia it will create an even more unfair and inefficient tax system.
Professor Patricia Apps, an FH Gruen Distinguished Fellow in the Economics
Program, Research School of Social Sciences, ANU and Professor of Public
Economics in Law at the University of Sydney has completed a study called
"Why an Earned Income Tax Credit Program is a Mistake for Australia".
The study investigates the economic effects of the Earned Income Tax
Credit (EITC) proposed by the "Five Economists" in an open letter to the
Prime Minister in 1998, using the ALP's 1998 Family Tax Credit program
scheme as a case study.
"My research has shown double income families - where two people are
supporting a household with children will be worst hit by the proposed
EITC system," Professor Apps said. "The study derives first the implications
for the marginal and average tax rates on primary and secondary earners
in the tax system, and then shows that the policy is essentially paid
for by two-earner households at the median wage levels."
The research identifies the EITC program as a mechanism for raising taxes
on median wage families with both parents working, for the purpose of
funding the rising cost of welfare due to labour market reforms. Professor
Apps believes this would discourage secondary earners in middle wage families
from working and cause a fall in the level of household saving, as well
as a fall in the tax base for funding an ageing population.
"These effects of the program are ignored by economists and politicians
alike who believe erroneously that only capital and high wage labour are
mobile in a globalised economy, and who then argue for shifting taxes
to low and median wage workers, " Professor Apps said.
"If a future government lowers the top tax rate as proposed by the Five
Economists and, more recently, by Peter Costello in his National Press
Club speech, the scheme would also provide a mechanism for funding tax
cuts for the higher income groups, from the same source."
A copy of the research paper is available on request.
For more information contact:
Professor Patricia Apps, FH Gruen Distinguished Fellow, Economics Program,
RSSS 02 9351 0241 (Sydney University) or 02 6125 4235 (ANU office)
or Clarissa Thorpe, Media Liaison Officer, on 02 6125 5575 (w), 0416
249 245 (m)
No: 51/2001
© 2000 Marketing & Communications Division,
The Australian National University.
Questions or Comments?
Last Modified Tue, July 16, 2002
|
