The use of selective benefits, directed to those considered most in need, has a high 'poverty reduction efficiency'. But selectivity inevitably produces non-linearities in the budget constraints facing individuals, which may have incentive effects. The design of a tax and transfer scheme...

This article uses the Melbourne Institute Tax and Transfer Simulator to examine the effects of a reduction in the means-tested benefit taper, or withdrawal, rates in Australia to 30 per cent. That is, all taper rates of 50 per cent and 70 per cent in the March 1998 benefit system are reduced to...