I’m a day late but this article in The Australian shows just how many distortions are being introduced as a result of changes to the baby bonus policy. Let me count them:
- Means testing: distortion for high income earners to bring births forward into 2008
- Confusion over means testing rules: distortion for marginal high income earners to bring births forward into 2008
- Move to fortnightly payments: potential incentive for cash strapped low income earners to bring births forward into 2008
- Means test based on post-birth income: distortion to keep household income below $75,000 in first six months or $150,000 in first year. Earn a little bit more and you lose $5,000
- No income reconciliation: mitigates 4 by telling people that they can earn more or less without penalty but does this mean there is a means test?
