Understanding Behavioural Responses to Tax and Transfer Changes: A Survey of Low-Income Households

Melbourne Institute Working Paper No. 15/98

Date: July 1998


Sally Cowling


This paper describes a role for qualitative research in examining the behavioural responses of low-income households to changes in personal income taxes, indirect taxes and transfers. A series of Focus Groups were conducted to flesh out decision-making processes with respect to labour supply and consumption. Discussions with sole parents and couples with dependent children are reported in this paper. Focus Group sessions explored the nature and strength of spending adjustments to past variations in prices, and the management of situations in which expenditure exceeded the participant's current income. A second strand of questions focused on the interface between the labour market and the tax and transfer systems. By identifying factors that had influenced their participation or non-participation in the paid labour force, Focus Group members shed light on possible labour supply responses to a change in effective marginal tax rates.

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