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Work Incentives under a New Tax System: The Distribution of Effective Marginal Tax Rates in 2002
Author(s) -
Beer Gillian
Publication year - 2003
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/1475-4932.00088
Subject(s) - economics , incentive , state income tax , payment , income tax , labour economics , welfare , work (physics) , distribution (mathematics) , tax incentive , gross income , public economics , tax reform , microeconomics , finance , market economy , mechanical engineering , mathematical analysis , mathematics , engineering
Effective marginal tax rates (EMTRs) provide a way of measuring the balance between targeting of welfare payments and the financial incentive to work. High EMTRs result from income tests for welfare payments overlapping with each other and/or the income tax system. Individuals who face high EMTRs over broad ranges of income have little financial incentive to increase their earned income. This paper examines the distribution of EMTRs across the Australian labour force in 2002. It also looks at how the number of people facing high EMTRs has changed since the introduction of the new tax system.