The EITC would seem to me to be the best alternative for all the reasons cited. But it does seem to have a problem with political reality as it requires the government to finance as opposed to the employer (and the rest of us consumers) when minimum wage is raised.

A tangential related question that does need to be addressed somewhere is; of all the people in the lowest wage quintile, how many of them are still in that quintile 5 and 10 years later?

I ask this question because I believe there is movement through this lowest wage quintile up into the next higher and beyond quintiles. I would readily agree that there is probably some small number of people that will stay forever in this lowest quintile however the people that are moving up the aspirational ladder will only need a bit of government help/support for a limited period of time until they can move upward and onward.

Knowing the numbers of people that are passing through and those stuck in this lowest quintile could have major impacts on the type and way of social services delivery.

A study of this wage movement was conducted in the US 15 or 20 years ago. I was amazed at the small number of people that appeared to be stuck in the lowest quintile while most moved on.

Andrew,

There is a great deal to your work: I am not sure I disagree with Bruce though.

Bruce,

I know I'm about to contradict my comment above - but if you can find money for a top rate cut given that effective rates seem to be a key idea - surely there is scope for arguing that the biggest windfall of "earned" income tax credits will be less people on welfare, or at a mininum more incentives to get of it. Thereby reducing benefits and also promoting a "working nation" (oops wrong word perhaps!) Andrew - I take it that this is the narative you are seeking to describe, or at least when the PR gurus get their hands on it: something approaching this??

Bill Clinton and Gordon Brown sold that agenda very well in the face of the opposition that Bruce describes. I am not sure that Howard/Costello or Beazley can actually describe this narative with the clarity that either the New Democrats or New Labour could.

Andrew - have you met Craig Emerson? Why is he not being talked of as a leader? He has the brain and the narative? Is it simply that he voted Latham against the AWU? Or is he too much of a "wonk"? He seems to be the only politician in Australia able to see past narrow interests and your central proposition for a reformist competent government.

As Monty Python might say: "I spit on your EITC, and I fart in its general direction".

The concept is fatally handicapped by applying a family income test. That prevents it from offering incentive effects (as in reduced EMTRs) at the time the person works. Instead, all it offers is a change in the size of the eventual tax refund. Maybe if you understand how it all works, and know a bigger tax refund is on offer up to 12 months down the track, you might think of it as a kind of Xmas Club account. But that's all.

If you want to improved incentives to work, it seems to me that you must change the EMTRs when the work is undertaken, not offer some benefit waaaaay downstream. The system must interact with PAYG tax scales. This can't happen with a family income test.

Now, if you model it on Australia's existing EITC (the mature age workers tax offset) which is individually based, not family tested, you might get more benefit, as there is then no real barrier to implementing it via PAYG. You get real EMTR reductions in real-time.

This is particularly an issue for second earners in couples. People like Patricia Apps make (inflated) statements about how bad EMTRs are for this group. Running the family tested EITC would only make them worse.

Speaking as one who has struggled terribly at one time on the problem of 2 blue collar incomes, where every hour extra you work, either overtime or outside work, is taxed at some horrific rate which makes you feel more like a trapped slave than a person in the land of opportunity. Some practical solutions might be:

1/ Allow splitting/equalization of income for families on x amount of family income. (Tax base rests on blue collar workers mostly, so could jeapordize government revenue ?)

2/ Allow tax credits for various things which would help blue collar workers predicament (same problem as for one ?)

There IS actually a solution.

But its not the one a number of people find Palatable.

Its called 'Social Healing thought Spiritual Renewal (in Christ)' no.. its not a 'movement' its just a fact. We can never escape certain fundamental proclivities in life, such as looking after our own, but the pattern demonstrated by the overcoming of the backgrounds of the 12 disciples of Christ, and the behaviour of the early Church, show that there is no need for ANYone to be living in poverty, irrespective of their income.

Matthew was a 'collaborator' (Tax collector)
Simon was an 'insurgent' (anti Rome terrorist)
Peter was a fisherman.

and so it goes on.

The early church was so grateful to God for individual renewal and forgiveness, they acted as follows: (Acts 2)

[44All the believers were together and had everything in common. 45Selling their possessions and goods, they gave to anyone as he had need. 46Every day they continued to meet together in the temple courts. They broke bread in their homes and ate together with glad and sincere hearts, 47praising God and enjoying the favor of all the people. And the Lord added to their number daily those who were being saved.]

This is not something which can be legislated, it can only happen when a nation turns at the heart level to our Creator.

I'm surprised Card and Krueger (1995) is still taken seriously, the data collected from a small sample of fast food restrunts does not take into account new jobs that will not be created because of the higher wages. Also the results of the telephone polls find them self in conflict with official payroll records of similar fast-food outlets in the relevant regions, during the same period of time.

The whole concept is very complex, but the problem with tax credits is that its offered as a rebate at the end of the financial year - often only available if the money was spent. Contrary to media misconceptions most poor people do not gamble, drink or smoke to excess, however if you get $200 a week then every dollar has to be considered before being spent. And not all people on low incomes get health cards, or concessions on gas electricity and car registration. People living on very low incomes don't have savings so if they don't have it, they won't spend it, and won't get the tax credit.

Poor people need the money now not when they submit their tax return. And as we all know if you don't know to ask for the rebate the Australian Tax Office won't tell you what you have missed out on and paying $265 to have your income tax return prepared for you might be beyond a poor person's budget.

Sounds like more smoke and mirrors to me - what about adopting the suggestions made by Micheal Carmody to the National Press Club, they were simple, sensible and fair.