The paper proposes a return to a progressive individual based income tax and universal family payments for dependent children, for reasons of both fairness and efficiency, and argues for the elimination of policy instruments that create complexity and serve only to reduce the transparency of tax reform.

In the early 1980's Australia had a highly progressive, individual based income tax and families received support for dependent children in the form of universal family allowances.  The introduction of income tests for child support payments based on family income (now in the form of Family Tax Benefit Part A), together with changes in the rate scale applying to personal income, have had the effect of replacing Australia’s progressive individual based income tax with a system that tends towards one of joint taxation under a rate scale that exhibits an inverted U-shaped profile - the highest marginal rates apply to average incomes, and to the incomes of the second earner in the family. This paper shows how the introduction of this new income tax system has shifted the overall burden of taxation towards families with two-earners on low and average wages and to working married mothers in particular as second earners.