Research Note: Distributional Modelling of Labor Tax and Child Care Payment Election Policies

Research Note: Distributional Modelling of Labor Tax and Child Care Payment Election Policies
Author/editor: Phillips, B., Gray, M., Webster, R. and Joseph, C.
Year published: 2019

Abstract

This research note presents estimates of the distributional impact of Labor’s 2019 Federal election tax policy for Australian households by disposable income and household wealth. It also considers the impact of Labor's child care policy. Labor policies are compared with the current policy settings as outlined in the 2019-20 Federal Budget.

The policies modelled are: dividend imputation; capital gains; negative gearing; the reinstatement of the Budget Repair Levy; changes to the Low and Middle Income Tax Offset; personal income tax rate and threshold settings; taxation of trusts; and changes to the Child Care Subsidy.

The impact of the Labor election policies for each year between 2018-19 and 2029-30 has been estimated using PolicyMod (our detailed microsimulation model of the Australian tax and transfer system). Benchmarking data from the Parliamentary Budget Office has been used to improve the accuracy of the aggregate estimates.

For simplicity, the results are presented in this paper in 2019 dollars. Several Labor policies involve grandfathering such as negative gearing and capital gains tax changes. The modelling assumes that all the policies are ‘mature’ in the sense that no grandfathering applies. Our numbers are consistent with Parliamentary Budget Office estimates.

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