Rise in effective marginal tax rate will serve as a dampener for increased workforce participation, study says

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The Turnbull government’s tax cuts for low and middle income earners will benefit women, who on average earn less than men, but the proposed tax offset increases the effective marginal tax rate, which is a disincentive for people to find work, according to a new analysis.

A study of the major budget initiatives by the National Foundation for Australian Women (NFAW), to be released on Sunday before the resumption of parliament, says the tax offsets proposed for 2018 would help a large number of low to middle income Australians. However, “the tax offset increases the effective marginal tax rate by 1.5% for taxpayers within the taper zone, which increases work disincentives for women and other low income taxpayers”.

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