The challenge
A core issue in public finance is to design tax systems that generate adequate revenue while maintaining economic efficiency and promoting equity. In the face of rising public debt, persistent inflation, and increasing demands on government budgets, many countries are pursuing tax reforms to strengthen fiscal capacity and improve redistribution. In this context, the formulation and evaluation of tax reforms are particularly important to ensure that policy changes achieve their intended revenue and distributional objectives.
The research
This project investigates the efficiency and distributional consequences of tax policy using Australian tax microdata. By modelling the complexities of contemporary tax systems at the microeconomic level, it provides insights into how taxes shape both revenue capacity and equity.
The project currently encompasses four key strands:
- Tax Reforms and the Laffer Curve
This research revisits the Laffer curve, extending it to account for (i) stepwise rate schedules, (ii) nonlinear tax reforms, (iii) taxpayer heterogeneity, and (iv) average tax rates. It examines how the efficiency costs of tax reforms influence progressivity and proposes modifications to standard measures. The analysis explains why reforms that seem politically attractive may be economically counterproductive and demonstrates how simple, intuitive tools like the Laffer curve can bridge the gap between theory and policy.
- Inflation, Bracket Creep, and Fiscal Policy
This study quantifies the revenue and distributional impacts of not indexing the personal income tax schedule. It examines the total cost of missing indexation, the effects of fixed offsets, and how bracket creep alters average and marginal tax rates, effective progressivity, and the overall redistributive capacity of the tax system.
- Designing Tax Reform: Distribution, Welfare, and Revenue
This strand explores how different tax reform designs influence income distribution, social welfare, and tax revenue, with a focus on revenue elasticity and behavioural responses.
The impact
This project equips policymakers with rigorous theoretical, empirical, and computational tools to design and evaluate tax reforms. By grounding analysis in micro-level behavioral foundations, it strengthens the link between economic research and practical policy design.
Our researchers
Melbourne Institute - Ana Gamarra Rondinel (Project Lead).
University of Michigan - James Hines Jr. (International collaborator)
Complutense University of Madrid - José Félix Sanz Sanz (International collaborator).
Grants supporting this project
- 2026 Research Impetus Grant, University of Melbourne
- 2026 Early Career Researcher Grant, University of Melbourne
- 2024 FBE Eminent Research Scholar Visit Grant, University of Melbourne
Affiliations and memberships
- Member, Australian Parliamentary Budget Office Expert Panel
- Member, The Community Tax Project, Melbourne Social Equity Institute (University of Melbourne)
- Research Affiliate, CESifo Institute (LMU, Germany)
- Research Affiliate, Tax and Transfer Policy Institute, Crawford School of Public Policy (ANU)