9326422401_Household Taxation and Gender Inequality in Australia (2)

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HOUSEHOLD TAXATION AND GENDER INEQUALITY IN AUSTRALIA Student's Name Course Date

1 Abstract Gender inequality has emerged as a significant issue affecting many countries globally especially in economic field. As a result, global efforts have been adopted to bridge the gap between men and women in aspects of work, employment, income, and responsibility to take care of children. In Australia, gender equality has not been achieved despite the inputs by the government to provide support for women. Efforts initiated by the Australian government include reinforcement of workforce participation for women, paid parental leave, and subsidy over child care among others. However, economic and fiscal policies around taxes have had indirect influence on the inequality between men and women in Australia. The country uses progressive tax system for levy taxes against its household members. The policy changes introduced through effective marginal tax rates (EMTR) and tax cuts have continued to lower the progressivity of tax system towards regressive. This has seem men who earn higher wages and work for long hours benefit more compared to women. Mothers who have the responsibility to take care of children have been left to bear the largest burden of paying tax than men. Keywords: Tax, inequality, quality, men, women, policies, and laws

2 Household Taxation and Gender Inequality in Australia Many governments and organizations achieve human rights objectives by reducing gender discrimination and promoting gender equity to ensure the economic participation of all people. However, despite the impressive growth performances in many economies, national and international tax laws and policies have worked against achieving economic gender equality. 1 The concept of tax fairness is only considered for achieving economic growth while being detached from social justice, causing an increase in poverty and income gaps. As a result, even though most tax policies have remained neutral, there are multiple aspects with indirect and significant effect on gender inequalities. 2 Many legal policies and obligations at all levels, including national and international fail to take into consideration the issue of gender inequalities while designing tax laws. The current paper examines how Australian household taxation causes gender inequality between working men and women. The family life cycle model encompasses Australian tax and childcare policies that recognize women as secondary household earners, impacting their allocation of time to work and market income. The country's family tax system has witnessed changes in the effective marginal and average tax rates over time, shifting the burden to partner mothers. Australian Tax System The tax system in Australia is a mix of direct and indirect taxes that the state and commonwealth governments levy, depending on the type. Residents of Australia pay taxes on their income from various sources, and the federal government has this jurisdiction. Taxes on income are levied on the total assessable income of an entity or an individual, less any deductions allowed. 3 Australia exhibits a tax-transfer system that encompasses taxation and expenditure policy that affects women. The federal government has absolute obligations 1 Apps, Patricia, and Ray Rees. Public economics and the household . Cambridge University Press, 2009: 2. 2 Andrienko, Yuri, Patricia Apps, and Ray Rees. "Optimal taxation and top incomes." International Tax and Public Finance 23, no. 6 (2016): 983

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3 when it comes to providing funds to support subsidy for child care and retirement policy. The country largely applies a progressive tax scale system to tax individuals, which allows the tax payable rate to increase with income. 4 This means that Australia's tax system treats its people differently depending on their earnings, where its average tax rate rises with income. However, in many jurisdictions, the country's average earnings for women are lower than for men. Therefore, it means that even where gender-specific taxes are absent, the impact of the progressivity in the tax systems will differ across genders considering the differences in the average incomes. 5 The variation in the impact of the household system is present in the Australian case, which causes economic inequality between men and women as men become the most beneficiaries of such a system. Similarly, the Australian tax system has become less progressive, unlike before. Today, the tax laws in the country are drafted such that they have almost entirely become gender-neutral by eliminating most gender-specific and formally discriminatory provisions. An example includes the changes made to the eligibility age for the pension that used to be lower for women at 60 years and 65 years for men. 6 However, following the adoption of changes, just like men, women have to qualify for a pension at 65 years. Further changes have been made towards pushing the age of qualifying for pension at 67 years for both gender (men and women). The changes are based on the belief that for equality to be formally achieved, couples should be treated as equal earners. Since 2009, welfare and superannuation laws have recognized couples of the same and opposite, including their children, as domestic 3 Apps, Patricia, Ngo Van Long, and Ray Rees. "Optimal piecewise linear income taxation." Journal of Public Economic Theory 16, no. 4 (2014): 524. 4 Apps, Patricia, and Ray Rees. "Raise top tax rates, not the GST." In Australian Tax Forum, vol. 28, no. 3, pp. 2013: 683. 5 Apps, Patricia, and Ray Rees. "Australian family tax reform and the targeting fallacy." Australian Economic Review 43, no. 2 (2015): 157 . 6 Atkinson, Anthony B., Thomas Piketty, and Emmanuel Saez. "Top incomes in the long run of history." Journal of economic literature 49, no. 1 (2015): 11.

4 partners equally by all taxes. Therefore, it is evident that the benefits provided under the transfer tax system are tested on the couple or joint income. This is despite the differences in social aspects such as childbirth and provision of child care which are the responsibilities that only affect women. 7 Australia has significantly adopted a tax-transfer system that is essentially less progressive. This tax system adopts lower benefits or payments for higher assets or income. It uses the joint unit of assessment for any member of a couple disregarding the social injustice treatment against women. Australia's Taxation and Gender Inequality Gender Inequality The issue of gender inequality is a global aspect that leaders across many nations, including Australia, have committed to addressing. According to the UN Special Report on Extreme Poverty and Human Rights, women have been disadvantaged economically and hence subjected to gender inequalities and poverty. The problem has been intensified by the many features of personal and corporate income taxation, charges, and transfer laws. The report also highlighted various factors, including lack of progressivity, failure to individualize tax laws, and lack of appropriate exemptions in tax payments as features that define income tax systems for different countries and make them discriminatory against one gender. According to the UN economic report, many economies use low tax rates, tax incentives, and special allowances in corporate income taxation. However, these initiatives only benefit men since they have larger shares of private capital and can form incorporated businesses under conditions that women cannot receive. 8 Economic experts have argued that using VAT without carefully designing it to protect low-income earners, most of whom include women, 7 Apps, Patricia F. "Optimal Tax Design: Choice of Tax Base and Rate Structure." In Apps, P. (2022). Optimal tax design: choice of tax base and rate structure [forthcoming]. Australian Tax Forum . 2022: 20. 8 Henry, Ken, Jeff Harmer, John Piggott, Heather Ridout, and Greg Smith. "Australia’s future tax system: report to the Treasurer." Canberra: Attorney-General’s Department, Commonwealth of Australia (2019): 32.

5 has significantly grown. VAT is considered the most important concerning consumption taxes. Consumption taxes have the potential of regressively reducing the after-tax incomes of women to a level that they cannot meet their needs and those of their dependents, such as minimum nutrition and other development needs. Therefore, it is evident that the issue of gender inequality has become prevalent across the borders of many countries and has a significant association with economic and fiscal policies. The issue of gender inequality has been sound in Australia's economic performance and often comes out during political competition when leaders seek votes from women. Women in Australia have experienced long motherhood penalties over an extended period going into decades. The average earnings made by women after giving birth is below half of their pre-birth level, especially in five years, despite most being the primary breadwinners. The report by KPMG reveals a weekly gender pay gap of $1 billion in Australia, and this gap extends to $518 billion per year between working men and women. 9 Executive positions exhibit most of these gaps witnessed in the pay depending on the gender showing about 18% compared to only 6% accountable for in the lower paid jobs. The report also indicates that more men representing 88.1%, are employed compared to 72.1% of women between 25 and 29 years. Additionally, men work for longer hours than women, making higher incomes and leading to pay gaps. It was based on these disparities in gender economic performance that the country has taken significant steps. The steps taken prove the existence of gender inequality in Australia. During the federal election in 2016, Malcolm Turnbull, Australia’s prime minister declared his support for feminism, where he acknowledged that women play a critical role and affirmed equal opportunity. The same declaration was made by his primary challenger, affirming championing for equality of women. These commitments that various political 9 Salido, Olga, and Julio Carabaña. "An increasingly squeezed middle class? Changing income distributions and inequality in the EU15 through the last economic cycle." Journal of Contemporary European Studies 27, no. 3 (2019): 346.

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6 sides have given are not in a vacuum since they help build on policy developments that are important and positive for gender equality. 10 Significant steps have been made toward ensuring gender equality through many strategic measures to boost women's working hours and increase their income levels. The government has gradually expanded financial support for childcare in Australia. As a result, the country has boosted the rate of four-year-olds in education at the early childhood level achieving 85%. 11 In 2018, the Australian government implemented the childcare subsidy program to enhance childcare, focusing on increasing women's participation in the workforce as a government policy. Besides, the Australian government introduced paid parental leave for the first time in 2011, which remains. Gender equality received another boost in 2012 when WGEA was established as an agency mandated with the role of ensuring gender equality in all workplaces in Australia. 12 This statutory federal agency collected and published credible data for years on the persistence of the gender pay gap. Vocal support has emerged, demanding the increased representation of women in top positions, including leadership roles and executive. 13 However, despite these efforts to achieve gender equality, the new economic regulations and policies have caused an indirect but significant impact on the inequalities between men and women. The changes in the household tax system, such as in the effective marginal and average tax rates over time exhibited by the Australian government, have favored men more than women leading to inequality. 14 10 Andrienko, Yuri, Patricia Apps, and Ray Rees. "Optimal taxation and top incomes." International Tax and Public Finance 23, no. 6 (2016): 984 11 Australian Productivity Commission. "Rising Inequality? A stocktake of the evidence." (2018): 34. 12 Apps, Patricia, and Ray Rees. "Optimal family taxation and income inequality." International Tax and Public Finance 25, no. 5 (2018): 1098. 13 De Henau, Jerome, and Susan Himmelweit. "Examining public policy from a gendered intra-household perspective: changes in family-related policies in the UK, Australia and Germany since the mid-nineties." Oñati Socio-Legal Series 3, no. 7 (2013): 23. 14 Kennedy, Tom, Russell Smyth, Abbas Valadkhani, and George Chen. "Does income inequality hinder economic growth? New evidence using Australian taxation

7 However, these commitments have not attained much, considering that significant tensions and contradictions exist regarding fiscal and federal economic policy that affect gender equality with specific reference to women. The issue of gender inequality in economic and fiscal policy is inseparable from the broad systematic Australian challenges that the government faces today during the financing. As a result, the last few decades have seen social, and tax cuts cumulatively become part of a "taxing for growth" agenda that has been in place over the years. These changes, together with the fiscal austerity of the Global Financial Crisis and the COVID-19 pandemic, have contributed to Australia pulling back on gender equality. The previous discussion about the tax system in Australia revealed that the last few decades have seen Australia moving towards adopting a tax-transfer system. The adoption of this system aims to reduce various changes that include enforcing the participation of the workforce, welfare payments reduction, and cutting tax rates for individuals, especially on their capital income. However, as these measures and steps take shape, little regard has been provided to consider adopting policies that could improve the economic status of women. The areas that have not been addressed include the impact of high levels of unpaid work and workplace discrimination on women. 15 Additionally, women have faced low earning levels because they are employed in low-paid jobs and have low resources for child care. All these issues that affect women need to be addressed amidst changes in the tax system that has continued to become less progressive and moving towards equity for both genders. 16 However, even as the country adopts the tax-transfer system, women still face the above problems that affect them more by the tax level paid than men. statistics." Economic Modelling 65 (2017): 121. 15 Apps, Patricia, Ngo Van Long, and Ray Rees. "Optimal piecewise linear income taxation." Journal of Public Economic Theory 16, no. 4 (2014): 526. 16 Shaviro, Daniel. "The Economics of Tax Law." Oxford Handbook of Law and Economics 3 (2017): 108.

8 How Work and Care Place Tax Burden on Women The Australian government has adjusted its policy goal to increase the number of women participating in the workforce. The government looks forward to achieving up to 25% more women participating in working since it has signed the G20 target. It has further designed and released a strategy for workforce participation. Though the issue of increasing the workforce participation of women is seen as a great move towards achieving equal representation, this policy goal has remained conflicted by the tax-transfer system adopted by Australia. There is significant evidence that the tax policy does not favor women who have to work fewer hours, affecting their income. Due to their family responsibility, the available information shows that women are forced to work part-time and only become second earners in the family. 17 For many years, the workforce increase for women has only been realized when it comes to performing part-time duties. The problem of workforce participation of women drops upon giving birth to a child and therefore does not recover to fully working again. Besides, women's labor supply is affected by the influence of expenditure and taxation policies such as paid parental leave, child care, and education policy, considering that women become primary carers of a child at some point in life. The tax-transfer policy of Australia has remained significantly influential and incoherent, especially when it comes to targeted reforms to increase the supply of labor for women. The Contribution of Effective Marginal Tax Rates (EMTRs) The high effective marginal tax rate (EMTR) forms part of the tax policy setting that has widened the gap of equality between men and women. EMTR applies for workers through the systems of cash transferred to making extra benefits and payments which is subjected to taxation. It describes the rate that measures any loss that occurs as a result of 17 Carriere, Kevin R. "Private and Public Policy: The Intersection of Cultural and Societal Laws." In Psychology in Policy , Springer, Cham, 2022: 36.

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9 combining income taxation with welfare or cash transfer withdrawal. 18 These benefits only apply to earnings that one gets as extra income depending on the working hours and cost of child care. Therefore, women considered secondary earners in the household often feel most of the effects of EMTR. Women being second earners, feel most of this effect of EMTR because they earn a low wage compared to men, who are considered primary earners with full-time wages. As explained before, the low wage earned by the woman is based on working part-time because of home and childcare responsibilities. The effect of the EMTR on the primary earner (P1, usual man) and second earner (P2, usually women) is illustrated in figures 1 and 2 to show the disparity between men and women caused by Australian household taxation. Figure 1: EMTRs per $1 of earnings, dual-earner family with two children Source: Stewart (2018, 20) Figure 2: EMTRs per day of work, dual-earner family with two children 18 Miranda, Stewart. Tax, Social Policy and Gender: rethinking equality and efficiency . ANU Press, 2018: 20.

10 Source: ( Stewart (2018, 20) From Figure 1, the second earner, usually a woman begins to earn income at a lower wage; hence her EMTR is at $20,000, which is about 70%. 19 If benefits are reduced at this point, and net childcare costs increase, the family has to lose 70% of earnings. The EMTR increases with the increase in wage on the second earners. In the situation where the earnings range between $20,000 and $25,000, the rate exceeds 100%. 20 This means that the family will lose more if the earnings for mothers increase because it also increase the EMTR increases especially when benefits reduce and net childcare costs increase. Figure 2 shows the attempted effects of EMTR on the second earners (women) when their working hours are increased. From the figure, the daily effective tax rate is between 80% and 90% when the second earner increased her part-time work from two to four days. 21 Mothers who mostly work part-time because of childcare responsibilities derive little from increasing working hours. This is caused by the effects of EMTRs and additional working costs. The policymakers have failed to acknowledge the structural design of tax-transfer system, which produces the EMTR effect. This disregards the design of the tax system as 19 Stewart. ‘ Tax, Social Policy and Gender’ 20. 20 Stewart. ‘ Tax, Social Policy and Gender’ 20. 21 Stewart. ‘ Tax, Social Policy and Gender’ 20.

11 integral to the disadvantage of the economy of women. Women become disadvantaged by this tax policy due to the interaction with their position in the household economies and discriminatory market. 22 Significant EMTRs influence the decision of mothers to work or not to work only a few hours per week because of the short-term financial impact. 23 This situation may impact the earning capacity of mothers in the long term over their lifetime. Therefore, there is little positive effect or benefits that middle-income families receive even with the government's expanded childcare subsidy. The design of Australian childcare policies fails to consider the organization of care for the child within the household, significantly contributing to economic gender inequality. The country has not embraced the debate on sharing the burden of childcare equally between men and women, such as through mandating men parental leave. This has led to the difference between mothers and fathers in how they trade time for child care for market time. 24 The previous findings indicate that mothers spend more time and prioritize time for child care than fathers, who emphasize work time more. 25 Though mothers and fathers adjust the time for child care depending on their partner's changes in the market work time, the age of the child, and the type of care, mothers prioritize primary child care over paid work. Fathers, on the contrary, prioritize secondary care over primary child care and find more time for market work. Therefore, mothers remain disadvantaged in market work since they have limited working hours, which determines the low wage they receive. 26 In this situation, the application of the EMTR has more effects on the mothers' earnings as second earners than the 22 Apps, Patricia. "Gender Equity in the Tax System for Fiscal Sustainability." In University of Sydney Law School and IZA Workshop , pp. 4-5. 2015: 23. 23 Stewart. ‘ Tax, Social Policy and Gender’ 20. 24 Andrienko, Yuri, Patricia Apps, and Ray Rees. "Optimal taxation and top incomes." International Tax and Public Finance 23, no. 6 (2016): 984. 25 Apps, Patricia, and Ray Rees. Public economics and the household . Cambridge University Press, 2009: 32. 26 Grown, Caren, and Imraan Valodia, eds. Taxation and gender equity . London: Routledge, 2015: 23.

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12 fathers. This happens especially when mothers who spend most of their time caring for their children decide to increase their working hours to add to their earnings. Besides, lone parents become affected by the tax-transfer policies of Australia as they strive to balance work and care by working more hours. At least 85% of the lone/single parents are women, which presents evidence of tensions in the tax-transfer policies for work and care. 27 Australia has about 20% of lone-parent families with children between 15 years of age. Even in the current era, it is common for mothers to take the primary role of taking care of children in the case of lone-parent households. The policy to activate the participation in the workforce has contributed to many single parents entering the labor market. They have since continued to experience more rigorous study and work policies today due to more benefits that come with working extra hours for lone parents, most considered increasing their working hours. As a result, lone parents, like mothers in a couple of marriages, face very high EMTRs while seeking more working hours, from part-time to full-time. 28 This considers the net costs of child care from a few of them who get high wages from full-time jobs. The situation of mothers who are lone parents has become worse off after a policy shift that saw them moved off the pension payment scale onto the lower rate new-start allowance when their youngest child within the house turns eight years. The most affected mothers are those who cannot work and depend on benefits. Most may be forced to work more hours, and their incomes may be subjected to high EMTRs leading to income inequality. Recent Australia's Tax Changes (Tax Cuts) Favor Men over Women Economists have argued that the current tax system in Australia burdens women more than it does for male counterparts in the working sector. One reason given is that men occupy higher-paying jobs, unlike it is for women who work part-time in low-paying jobs. The 27 Senate Economics References Committee. 'A husband is not a retirement plan': Achieving economic security for women in retirement . Parliament of Australia, 2016: 21. 28 Hicks, Jacky, Berni Smith, Anna Downs, and Benedetta Musillo. "Conversations on Gender and Tax." (2022):26.

13 situation has been made worse by the actions of federal politicians on different political sides that have made many changes to the tax policy. 29 The most notable changes include the cuts in the personal income tax and superannuation tax concessions, which aimed to alleviate the pressure on working-class Australians. By their structural design and outlook, these changes to tax policies do not appear inherently discriminatory. However, many economic experts have noted that the policies have inadvertently led to inequality between men and women and the rich and the poor. 30 As earlier indicated in this paper, Australia's tax system is progressive and has been so for an extended period of time. This system allows the government to impose the average tax rate or the total amount of tax paid as an income percentage. 31 It then means that tax increases with the increase in the taxpayer's income. However, as more changes in the tax system are introduced, this has raised concern among the experts who view that the system's progressivity has been reducing. Despite being the higher-wage earners, a new analysis by The Australia Institute revealed men have been receiving more tax benefits than women following the reforms. 32 For instance, in the financial year 2020, men received three in every five dollars of tax benefits and seven in every 10 dollars of tax benefits in the preceding years. Over time, the changes to reform the tax system have led to them becoming more regressive and less progressive. For instance, in the financial year 2020/21, men received 60% of the benefit from the tax plan by the government, while women received 29 Stewart, Miranda, André Moore, Peter Whiteford, and R. Quentin Grafton. A stocktake of the tax system and directions for reform: Five years after the Henry Review . Tax and Transfer Policy Institute, Crawford School of Public Policy, 2015: 21. 30 Hill, Elizabeth. "Reducing gender inequality and boosting the economy: fiscal policy after COVID-19." Labour Market Policy after COVID-19. Committee on Economic Development in Australia (CEDA) (2020): 45. 31 Apps, Patricia F. "Optimal Tax Design: Choice of Tax Base and Rate Structure." In Apps, P.(2022). Optimal tax design: choice of tax base and rate structure [forthcoming]. Australian Tax Forum . 2022: 21. 32 Apps, Patricia, and Ray Rees. "Optimal family taxation and income inequality." International Tax and Public Finance 25, no. 5 (2018): 1095.

14 40%. 33 In the following year, 2021/22, men received 69% of the government tax plan benefit while women received 31%. 34 As the government permanently adopts the new tax setting, it is evident they are moving towards benefiting primary earners who make higher incomes, most of whom are men than women. The stage-three tax cuts aimed at removing the 37 cents in the dollar tax bracket and lowering the 32.5 cent bracket to 30 cents while targeting to raise the top tax bracket to start at $200,000, unlike the current one of $180,000. 35 This analysis reveals that a person earning $200,000 yearly would have the tax cut by $174 weekly, while one earning $50,000 would receive $2.40 weekly. 36 When comparing the two persons, the higher earner gets 73 times the benefit of the lower earner. The parliamentary budget office also analyzed the Greens and established similar findings as those of the Australia Institute. The report indicated that the average annual tax cut for a man assessed to be $1,430 or twice more than for women, which is $730. 37 In the Australian context, those earning more than $180,000 yearly make up 3.5% of the taxpayers who occupy the top tax bracket. This group alone makes benefits of up to 45% in tax savings. Projections for the financial year 2024/25, which is the first year of operation, show that the top 1% of income earners would be able to save up to $1.3 billion in taxes. This amount would be twice the value of the bottom 60% of the earners, which is $700. Further analysis by the parliamentary office shows that the first decade following the new tax changes would have the top 1% pocketing $11.8billion compared to $12.7, which the 33 The Australia Institute. Coalition’s Tax Cuts Favour Men Over Women (2020): 2. https://australiainstitute.org.au/post/coalitions-tax-cuts-favour-men-over-women/ 34 Hutchens, Gareth. Pink and blue forms: is gender-based tax really as crazy as it sounds? The Guardian (2018): 3. 35 Hannam, Peter. Men on high incomes to take lion’s share of Coalition’s $184bn tax cuts, analyses find (2022): 2. 36 Hannam, Peter. Men on high incomes to take lion’s share of Coalition’s $184bn tax cuts, analyses find (2022): 37 Khadem, Nassim. Australia's tax system favours men over women so it's time to make the budget more female-friendly. ABC News, 2022: 2.

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15 lower 60% will pocket. 38 The personal income tax plan has successfully been adopted from one government to the other to show the government leaders' determination to kill Australia's progressive tax system. The Australian Council of Social Service dispelled the argument that the use of percentage changes meant that young people and women gain more from the tax cuts than normal. However, the concept is that those at lower income levels, including women, do not pay much taxes on income since their wages are already low. For example, any woman who works part-time and earns $600 weekly has to pay $40 as tax. A weekly tax cut of $10 amounts to a quarter tax reduction, but it is only 1.6% of her income. 39 Therefore, it is evident that the stage-three tax cuts have an impact on reinforcing gender inequalities in income since it benefits people already in paid work and higher incomes. For instance, with the tax cuts on personal income, out of the 78% of the value of stage three of these cuts, only a third will go to women. This shows that the changes would benefit men more than women, hence the gender inequality exhibited by the household taxation system adopted by the country. The analysis illustrates that higher earners benefit more from the tax relief/cut than those earning lower wages. In Australia, as earlier indicated, higher-income earners are disproportionately male. Therefore, experts have argued that any attempts through tax changes to give rich Australians a tax cut more than those with low income will have the majority of beneficiaries being men compared to women. 40 The disparity worsened in recent years when the recession hit women following the COVID-19 pandemic. 41 Most had an 38 Khadem, Nassim. Australia's tax system favours men over women so it's time to make the budget more female-friendly. ABC News, 2022: 2. 39 Jericho, Greg . Australian tax data is absolute proof of the gender pay gap across the entire economy. The Guardinan, 2022: 2. 40 Coelho, Maria Delgado, Aieshwarya Davis, Mr Alexander D. Klemm, and Ms Carolina Osorio Buitron. Gendered Taxes: The Interaction of Tax Policy with Gender Equality . International Monetary Fund, 2022: 15. 41 Craig, Lyn, and Brendan Churchill. "Working and caring at home: Gender differences in the effects of COVID-19 on paid and unpaid labor in Australia." Feminist economics 27, no. 1-2 (2021): 315.

16 enormous economic impact and lost jobs as they stayed home to care for their children. As this happened, boys had more jobs because most male-dominated industries, including construction, continued to do well. However, the design of tax changes is such that men benefit more than women, widening the economic divide between the two genders. 42 Experts have observed the failure of the government to apply the basic principle of optimal taxation that requires putting lower tax rates on goods with higher sensitivity to tax. 43 In this case, the female labor supply is more sensitive to income tax than the men's labor supply men. Therefore, applying this principle, the tax rates on income that women earn should be lower than for men. Instead of practising optimal taxation principles to achieve gender equality, the new tax changes adopted in Australia have seen female workers whose labor supply is sensitive receive higher tax rates. This has led to women getting fewer benefits and carrying more tax burdens. Married women are secondary income earners within the household, meaning they face higher EMTR. Therefore, they are the main drivers behind the higher female tax sensitivities and need to be subjected to lower tax rates. Economic experts have argued that gender inequality has been prompted by the tax settings in favor of men because men tend to earn more than women and work full time, considering that they are less likely to take time off work to raise children. 44 From this perspective, any attempt to make the tax system regressive or less progressive tends to disadvantage men. Though the proponents of these tax changes have maintained that decisions related to the person staying at home to care for the child are personal, it possible that the tax policy settings can influence a different outcome. 45 The efforts by the Australian government to have equal participation of men and women in 42 Zhang, Yinjunjie, and Robert V. Breunig. "Gender norms and domestic abuse: evidence from Australia." Tax and Transfer Policy Institute-working paper 5 (2021): 21. 43 Apps, Patricia, and Ray Rees. Public economics and the household . Cambridge University Press, 2009 (p.35). 44 Apps, P., & Rees, R. (2022). Inequality measurement and tax/transfer policy. International Tax and Public Finance , 29 (4), 955.

17 the workforce have been observed; there is a need to work on the tax policy system so that low-income earners are not disadvantaged. Achieving Gender Equality through Australian Tax System The business of gender equality has continued to remain unfinished in Australian fiscal and economic policy even after many years of policy change and advocacy. Many economic professionals have persistently argued and proposed what they term as most effective measures that could help achieve gender equality within their economy. 46 The proponents of the effects of EMTRs and average tax changes, such as the personal income tax cuts, have argued that focusing on improving the tax system in the country would help eliminate inequality. Through this, much burden rests on the women should for reasons including but not limited to the low wages they receive. For instance, Matt Grudnoff of The Australia Institute argued that it was not enough for government to focus on enhancing women's work participation, put subsidies on child care, paid parental leaves, or take other measures to improve the work performance of women to curb gender inequality. Grudnoff insisted that despite the political commitments by leaders to attain gender equality, women have been disadvantaged through the intersection of the tax-transfer system with child care, education, parental leave, and retirement policies which tend to reproduce deeply gendered dynamics. 47 The senior economist argued that the government needed to take more stringent tax measures to relieve those who make low incomes from working if gender equity has to be achieved. The transition of the Australian tax transfer policy towards a new regime of care and work to increasingly engage women in paid employment would help achieve gender 45 Stewart, Miranda. "Gender inequality in Australia’s tax-transfer system." AND GENDER (2017): 1. 46 Austen, S., Sharp, R. and Hodgson, H., 2015, January. Gender impact analysis and the taxation of retirement savings in Australia. In Australian Tax Forum (Vol. 30, No. 4, pp. 765. 47 Austen, Siobhan, Therese Jefferson, and Rachel Ong. "The gender gap in financial security: What we know and don't know about Australian households." Feminist Economics 20, no. 3 (2014): 26.

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18 equality. Therefore, the Australian government needs to consider reforming policy in the tax- transfer system, retirement fields, and childcare as measures of redressing the disadvantages women face in their lifetime compared to men. The Need to Tax for Equality as Opposed to Taxing for Economic Growth Over the years, household taxation in Australia has focused on the search for wealth and capital accumulation by all means available through the enactment of taxation laws. There have been continued debates on using corporations and households as the units for tax. At the same time, the focus shifted towards conceptualizing the associations between ownership and taxation of incomes and capital. 48 However, there is no doubt that the proponents of using tax systems to mitigate gender inequalities in wealth and incomes agree that achieving equality should be coupled with the motivation for all people to work and accumulate wealth. Australia succeeded in introducing capital gains taxation in 1985, and since then, the country has also continued to offer exemptions generously for capital gains in its corporate and income tax systems. However, the fact that the country has shifted its focus to capital gains and wealth creation means its goal is to achieve economic growth instead of equality. 49 There is a need to consider adjusting fiscal policy to have tax laws that can help the country achieve gender equality. The call to tax for gender equality requires gender budget work intersection and growing recognition of women's equality in the law, including tax and expenditure policies. The strategies that need to be adopted to facilitate taxing for gender equality include tax reduction on low incomes, especially second earners and self-employed people. Most of the second earners in the household include women who make lower wages because of their role 48 Apps, P., & Rees, R. (2022). Inequality measurement and tax/transfer policy. International Tax and Public Finance , 29 (4), 956. 49 Bray, J. Rob. "Changes in inequality in Australia and the redistributional impacts of taxes and government benefits." Measuring and promoting wellbeing: how important is (2014): 423.

19 as primary child caretakers. 50 Another strategy that entails taxing for equality involves increasing the security of income, training support, and pension of workers in low-income and with low skills as well as middle-income workers and single/lone parents. Most people in these categories are women with low incomes and skills because of the nature of their role in taking care of the children before and after birth. 51 The provision of funds through these taxing measures requires increasing graduated corporate and personal income tax rates while increasing care resources that help equalize workloads of low-paid workers that remain unpaid. The increased capital income taxation and reduced use of tax expenditures are measures that can be taken to tackle the issue relating to gender inequality and achieve equality. 52 Therefore, an exclusive focus on growth can be addressed through tax regulatory methods, and the new tax and transfer policies are critical in counteracting income inequalities between men and women. Conclusion Economic studies and reports show that household taxation aspects, such as the Australian family tax system, impact gender inequalities. Specifically, the changes witnessed in the effective marginal and average tax rates over time have shifted the burden to partner mothers. Like many other countries, Australia has made various strives toward ensuring gender equality, especially in the economic sphere of men and women. The tax system in Australia exhibits both direct and indirect taxes levied by the authority depending on the levels of requirement. The common feature exhibited by this tax system is progressivity, where taxes are levied concerning the level of income that residents earn. Therefore, people 50 Gunnarsson, Asa. "Gender Equality and Taxation-International Perspectives." Available at SSRN 3818771 (2021): 21. 51 Davidson, Peter, Bruce Bradbury, Melissa Wong, and Trish Hill. "Inequality in Australia 2020-part 2: who is affected and why." (2020): 21. 52 Itriago, D., and C. Rodríguez. "Do taxes influence inequality between women and men." Oxfam International (2019): 32.

20 working in Australia who make higher incomes have to pay more than those with lower incomes. However, the progressivity of the tax system in Australia has become less over the recent years. Today, the tax laws in the country are drafted such that they have almost entirely become gender-neutral. The country's system has eliminated most gender-specific and formally discriminatory provisions. As a result of these changes, most low-wage earners have become disadvantaged compared to those in higher-income brackets. Considering that women are the most occupiers of the low-wage brackets, they have been most affected, leading to gender inequalities. Though the issue of gender inequality is a common problem that affects many global countries, Australia's tax system has led to its escalation. The country exhibits tax transfer that is more regressive than progressive, leaving more burden on low-income earners. Even with most domestic tax laws remaining gender-neutral, multiple taxation aspects have an indirect but substantial impact on gender-related socio-economic inequalities. Women in Australia have experienced long motherhood penalties over an extended period going into decades. EMTR is a key policy setting that contributes to the inequalities in gender since it involves combination of withdrawing cash transfer that come due to working extra hours and income taxation especially on lower earners. EMTR puts more tax on women who need to work more hours to meet their economic needs for themselves and their families. Similarly, the recently adopted tax changes to embrace tax cuts on personal incomes have seen many men benefit more than women. The cuts have relieved higher figures on those who earn higher than those in low wage brackets. An improvement toward gender equality requires changes in the Australian tax system to adopt more friendly policies for low-income earners, most of who include women.

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22 Bibliography Andrienko, Yuri, Patricia Apps, and Ray Rees. "Optimal taxation and top incomes." International Tax and Public Finance 23, no. 6 (2016): 981-1003. Apps, P., & Rees, R. (2022). Inequality measurement and tax/transfer policy. International Tax and Public Finance , 29 (4), 953-984. Apps, Patricia F. "Optimal Tax Design: Choice of Tax Base and Rate Structure." In Apps, P. (2022). Optimal tax design: choice of tax base and rate structure [forthcoming]. Australian Tax Forum . 2022. Apps, Patricia, and Ray Rees. "Australian family tax reform and the targeting fallacy." Australian Economic Review 43, no. 2 (2015): 153-175. Apps, Patricia, and Ray Rees. "Optimal family taxation and income inequality." International Tax and Public Finance 25, no. 5 (2018): 1093-1128. Apps, Patricia, and Ray Rees. "Raise top tax rates, not the GST." In Australian Tax Forum , vol. 28, no. 3, pp. 679-693. 2013. Apps, Patricia, and Ray Rees. Public economics and the household . Cambridge University Press, 2009. Apps, Patricia, Ngo Van Long, and Ray Rees. "Optimal piecewise linear income taxation." Journal of Public Economic Theory 16, no. 4 (2014): 523-545. Apps, Patricia. "Gender Equity in the Tax System for Fiscal Sustainability." In University of Sydney Law School and IZA Workshop , pp. 4-5. 2015. Atkinson, Anthony B., Thomas Piketty, and Emmanuel Saez. "Top incomes in the long run of history." Journal of economic literature 49, no. 1 (2015): 3-71. Austen, S., Sharp, R. and Hodgson, H., 2015, January. Gender impact analysis and the taxation of retirement savings in Australia. In Australian Tax Forum (Vol. 30, No. 4, pp. 763-781).

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23 Austen, Siobhan, Therese Jefferson, and Rachel Ong. "The gender gap in financial security: What we know and don't know about Australian households." Feminist Economics 20, no. 3 (2014): 25-52. Australian Productivity Commission. "Rising Inequality? A stocktake of the evidence." (2018). Bray, J. Rob. "Changes in inequality in Australia and the redistributional impacts of taxes and government benefits." Measuring and promoting wellbeing: how important is (2014): 423. Carriere, Kevin R. "Private and Public Policy: The Intersection of Cultural and Societal Laws." In Psychology in Policy , pp. 33-51. Springer, Cham, 2022. Coelho, Maria Delgado, Aieshwarya Davis, Mr Alexander D. Klemm, and Ms Carolina Osorio Buitron. Gendered Taxes: The Interaction of Tax Policy with Gender Equality . International Monetary Fund, 2022. Craig, Lyn, and Brendan Churchill. "Working and caring at home: Gender differences in the effects of COVID-19 on paid and unpaid labor in Australia." Feminist economics 27, no. 1-2 (2021): 310-326. Davidson, Peter, Bruce Bradbury, Melissa Wong, and Trish Hill. "Inequality in Australia 2020-part 2: who is affected and why." (2020). De Henau, Jerome, and Susan Himmelweit. "Examining public policy from a gendered intra- household perspective: changes in family-related policies in the UK, Australia and Germany since the mid-nineties." Oñati Socio-Legal Series 3, no. 7 (2013). Grown, Caren, and Imraan Valodia, eds. Taxation and gender equity . London: Routledge, 2015 Gunnarsson, Asa. "Gender Equality and Taxation-International Perspectives." Available at SSRN 3818771 (2021).

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24 Hannam, Peter. Men on high incomes to take lion's share of Coalition's $184bn tax cuts, analyses find (2022). https://www.theguardian.com/australia-news/2022/feb/17/men- on-high-incomes-to-take-lions-share-of-coalitions-184bn-tax-cuts-analyses-find Henry, Ken, Jeff Harmer, John Piggott, Heather Ridout, and Greg Smith. "Australia's future tax system: report to the Treasurer." Canberra: Attorney-General's Department, Commonwealth of Australia (2019). Hicks, Jacky, Berni Smith, Anna Downs, and Benedetta Musillo. "Conversations on Gender and Tax." (2022). Hill, Elizabeth. "Reducing gender inequality and boosting the economy: fiscal policy after COVID-19." Labour Market Policy after COVID-19. Committee on Economic Development in Australia (CEDA) (2020). Hutchens, Gareth. Pink and blue forms: is gender-based tax really as crazy as it sounds? The Guardian (2018). https://www.theguardian.com/australia-news/2018/jun/08/pink-and- blue-forms-is-gender-based-tax-really-as-crazy-as-it-sounds Itriago, D., and C. Rodríguez. "Do taxes influence inequality between women and men." Oxfam International (2019). Jericho, Greg . Australian tax data is absolute proof of the gender pay gap across the entire economy. The Guardinan (2022). https://www.theguardian.com/business/grogonomics/2022/aug/10/australian-tax-data- is-absolute-proof-of-the-gender-pay-gap-across-the-entire-economy Kennedy, Tom, Russell Smyth, Abbas Valadkhani, and George Chen. "Does income inequality hinder economic growth? New evidence using Australian taxation statistics." Economic Modelling 65 (2017): 119-128.

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25 Khadem, Nassim. Australia's tax system favours men over women so it's time to make the budget more female-friendly. ABC News (2022). https://www.abc.net.au/news/2021- 04-20/australia-tax-system-favours-men-over-women-federal-budget/100080212 Salido, Olga, and Julio Carabaña. "An increasingly squeezed middle class? Changing income distributions and inequality in the EU15 through the last economic cycle." Journal of Contemporary European Studies 27, no. 3 (2019): 343-356. Senate Economics References Committee. 'A husband is not a retirement plan': Achieving economic security for women in retirement . Parliament of Australia, 2016. Shaviro, Daniel. "The economics of tax law." (2014): 14-06. Shaviro, Daniel. "The Economics of Tax Law." Oxford Handbook of Law and Economics 3 (2017): 106-126. Stewart, Miranda, André Moore, Peter Whiteford, and R. Quentin Grafton. A stocktake of the tax system and directions for reform: Five years after the Henry Review . Tax and Transfer Policy Institute, Crawford School of Public Policy, 2015. Stewart, Miranda. "Gender inequality in Australia's tax-transfer system." AND GENDER (2017): 1. Stewart, Miranda. Tax, Social Policy and Gender: rethinking equality and efficiency . ANU Press, 2018. The Australia Institute. Coalition's Tax Cuts Favour Men Over Women (2020). https://australiainstitute.org.au/post/coalitions-tax-cuts-favour-men-over-women/ Zhang, Yinjunjie, and Robert V. Breunig. "Gender norms and domestic abuse: evidence from Australia." Tax and Transfer Policy Institute-working paper 5 (2021)

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9326422401_Household Taxation and Gender Inequality in Australia (2)

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