The Australian income tax and transfer system has undergone considerable reform since the mid 1980s. As a number of commentators have pointed out, one impact of reforms to cash transfers for families, as well as of some reforms to direct taxes, has been the evolution of a defacto system of family taxation, with negative consequences, in terms of incentives to earn (and consequent deadweight loss), for parents, and especially for secondary earners in couple families with children. In this paper, we use a new Australian microsimulation model, ATM, built on the EUROMOD platform to examine the extent to which policies to support families with children through the tax and transfer system have been achieved at the expense of gender equity, and how the system could be better designed to achieve child poverty reduction with gender equity. Our analysis suggests that the institution of a universal family payment that would both improve incentives and reduce child poverty is potentially affordable, even before reduction of deadweight loss under the current system is taken in to account. However, such reforms as are modelled here would be politically difficult, since the main gainers would be families with children in the top half of the income distribution, and the main losers would be taxpayers who do not have dependent children.
family payments income tax redistribution effective marginal tax rates Australia microsimulation