Trends in Effective Marginal Tax Rates in Australia from 1996–97 to 2006–07*

This article reviews trends in effective marginal tax rates (EMTRs) from 1996–1997 to 2006–2007 for working‐age Australians. Although sweeping income tax cuts reduced effective tax rates for many taxpayers, the extension of income‐tested welfare payments and tax concessions worked in the opposite direction. The proportion of working‐age Australians facing EMTRs of more than 50 per cent increased during the period, from 4.8 to 7.1 per cent, representing some 910,000 Australians. This article also provides the first international comparisons of how the distribution of EMTRs for earners in Australia compares with those prevailing in Europe.