If it were done, then 'twere well it were done quickly

According to today’s press, the Baby Bonus is about to be means-tested:

But yesterday Mr Rudd began the speculation the baby bonus and other forms of so-called middle-class welfare would be means-tested in the budget.

“I say people at the upper end of the income spectrum don’t actually need direct support from the government, much,” he told radio 3AW.

The bonus is worth $4187 per child* and is scheduled to rise to $5000 on July 1.

As I’ve argued before, the Baby Bonus is bad policy and should be scrapped. Still, means-testing it would be a step forward. But there’s one important thing to bear in mind – any change to the Bonus should come into effect on the day it’s announced, and not on July 1. We already have an incentive for eligible parents to shift births from June to July. The last thing we need is another incentive for affluent parents to shift births back from July to June. If that occurs, then here’s the kind of thing we can expect.

With the alcopops tax, the federal government has demonstrated that it can change policy immediately when it sees the potential for people to game the system. The same should happen with any changes to the Baby Bonus.

* Not that it matters much, but the Baby Bonus is actually worth $4258 at present.

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3 Responses to If it were done, then 'twere well it were done quickly

  1. Seneca says:

    Agree best scrapped but on your point about annoucement: would any likely means testing make such a large difference to be an incentive to risky inducements? It all depends on the details but I would be interested in your hunch on this.

  2. Pingback: CoreEcon » Blog Archive » Means testing the baby bonus

  3. Patrick says:

    Tax policy has always been different – they call it ‘legislation by press release’. I guess it evolved because of the interaction between the significant incentive to plan around announced legislation and the significant time involved in drafting appropriate legislation.

    There are consolidation amendments which have been announced, and which the ATO accepts as law, but which were announced three or four years ago and still haven’t been announced.

    Capital gains tax was legislated nearly two years after being announced, and imposed.

    It is easy to believe (and you have gathered evidence to support) that similar incentives exist in all areas of revenue, and they should adopt the same approach.

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