I had vowed to not say another word on the baby bonus but the renewed speculation that something might be done has drawn me out. The talk now is of means testing it. As Andrew Leigh notes, this would have to be done with plenty of care but nonetheless would be a good step forward.

So let me recount how this might be done.

(ii) the government moves the bonus as a tax rebate rather than a straight out payment.

(iii) then the government puts a gradient on the baby bonus based on income level reducing it to $3,000 for the highest income earners (on the same basis as other child-based payouts) with a straight line based on income back to $4,000 for those paying no tax;

(iv) then, from 1st July, 2009, it starts reducing the income threshold.

5:40:52 PM    

Another good one from Andrew Leigh.

As we draw near to budget time, there has been plenty of talk about what “middle Australia” will get. But where exactly is the middle? To provide a more precise sense, I’ve tabulated the pre-tax annual income distributions for individuals and households, in the 2008-09 tax year. My raw data is the 2006 HILDA survey, which was roughly coincident with the 2006-07 tax year.

Those numbers are then inflated by 8%, which is roughly what the budget papers suggest nominal wage growth has been over the past two years.

Households
1% $10,389
5% $18,036
10% $25,920
25% $46,252
50% $80,826
75% $122,040
90% $172,152
95% $217,555
99% $388,368
Mean: $95,542

Individuals
1% $0
5% $0
10% $0
25% $1,620
50% $19,440
75% $48,600
90% $75,686
95% $97,416
99% $175,532
Mean: $32,337

In other words, half the households in Australia have a pre-tax income of less than $80,826, while 35% of households and 5% of individuals have pre-tax incomes over $100,000.

5:12:48 PM