October 6, 2022 3:59pm by PaulL

Effective Marginal Tax Rate Index

This post series on the financial incentives to work, and the impacts of our tax and transfer system on household formation is by PaulL, a regular commenter and occasional contributor to Kiwiblog. This post is the index post for the overall series and will be updated with links to each post as they are released. Some posts are planned but not released yet.

Story arc 1: What do our tax and transfer incentives look like at the moment?

Why do incentives to work matter? Why do we care whether people have an incentive to work?
What is an effective marginal tax rate? How do you calculate an effective marginal tax rate, what’s included in it?
Example 1: Sole parent, 2 kids. Illustration of the income and clawbacks facing a sole parent moving into work, or considering increasing their hours of work
Example 2: Sole parent, 2 kids. Illustration of the income and clawbacks facing a sole parent increasing their hourly pay rate (i.e. returns to increased productivity)
More examples: Other demographics. Illustration of the EMTRs facing single people with no children, couples with children with one person working, couples with children with neither working.
EMTRs and household formation. What impact does the tax and transfer system have on incentives to form stable relationships?
Summary of EMTR impacts. What do all the preceding posts tell us in general?

Story arc 2: What could we do about that?

What sorts of policy are available to us? An attempt to categorise and describe the interventions we might choose to use
Universal basic income: would this help and can we afford it?
Universal child support: could we afford to make the child support portions of the benefit system universal? These are the cause of much of the EMTR problem.
Tax free threshold: this may be politically advantageous, but does it help with incentives to work?
Adjusting thresholds or marginal tax rates: can this let us improve incentives to work?
Adjusting abatement rates: what would this cost and does it help?
Lowering benefits: could this help fix abatement rates, and is it politically possible or a good idea?
Non-financial incentives: what can we do to encourage work that doesn’t rely on financial changes?
Recommendations: what would I do if I was in charge of things?