The problem of the effective marginal tax rate is not addressed in this study.

 Consider a family with an annual income of $40,000 and childcare expenses of $4,000 p.a. Under the proposed schedule, they would receive a tax credit of 70%, or $2,800.

 Now suppose the family's income increases to $45,000. Their credit rate declines to 66%, or $2,640.

 Thus, their $5,000 p.a. increase in income has resulted in a benefit decline of $160, an effective marginal tax rate of 3.2%.

 By itself, this is not much; but when added to all the other means-tested programmes out there, the effective marginal tax rates can be horrific - to the point where there is no point in picking up an extra shift or getting a slightly better job.

 Means-testing destroys incentive. This is a terrible plan.