Abstract

This paper considers the potential for a basic income (BI) or guaranteed minimum income (GMI) scheme for Australia. We examine the proposal for a GMI advocated by the Henderson Poverty Inquiry in 1975. We briefly discusses the rationale for a BI and then focus on work incentive effects, design and financing of a BI in the Australian context. The paper describes and models four options that would move the current Australian system towards a partial or categorical BI, with an innovative approach of financing the BI by a wealth tax to keep the tax rate on earned income relatively low. Such a BI could help ease the effective marginal tax rates that affect families and welfare recipients, and would provide extra support to those with low or fluctuating incomes. For each option, the paper explores the required tax rate and the distributional outcomes for different family types and incomes.

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