Monday, January 14, 2008

Baby bonus is for everyone

When the baby bonus was introduced into Australia there were are large number of naysayers as is expected.
People tend to forget the treasurer at the time (Peter Costello) introduced the bonus as a way to increase the fertility rate, so that the demographic nightmares which will engulf Japan, Europe and China can be lessened or reversed in Australia.

To put it simply. The Government introduced the baby bonus as an investment (in their eyes), the return being that there will be a similar number of taxpayers as there are now to cope with aging population demographic.
So the government GIVES NOW, knowing it will TAKE and TAKE TAXES in the future from these recent newborns.

Now we get the funny and sad bit.
Most major newspapers rang stories on how the RICH suburbs are also claiming the baby bonus. So the Government should means test the baby bonus. This will stop middle-class welfare apparently. Blah blah welcome to Marxist class warfare garbage peddled as an opinion piece.

Wrong, bad idea. Go read the previous paragraph. This is about the next generation of taxpayers remember.
Now go and read the ATO tax reports by postcode for NSW.
The average Kirribilli taxpayer pays an average net tax of $37,000.00!!
Compare this with Liverpool, NSW, which apparently has the most claims for the baby bonus.
The average Liverpool taxpayer pays an average net tax of $8,891.00. That is 4.6 times less than the average Kirribilli taxpayer.

A little arithmetic and little data gathering from public available sources on the net and we find that if anything, the government should be encouraging those $100K income per year "rich" bastards in Kirribilli to have more babies, especially given those children are likely to pay 4.5 times more tax!

Over their working life of 40 years.
Average Kirribilli Taxpayer will pay $1,480,000 in tax.
Average Liverpool Taxpayer will pay $355,640 in tax.

Now you see why the government is not going to scrap this policy (nor means test it) anytime soon.
Cynically the Return on Investment (ROI) for the government is massive. Outlay $5000 dollars now and get a 7112% ROI on the kid in Liverpool, and 29,600% ROI on the kid in Kirribilli!

I thought the idea of paying only on the 2nd child would have merit. However potentially it is worth more (to the government) to continue the 1st child payment and increase the 2nd child payment by 50% and third (the so-called "child for your country") maybe 150%-200%.

If I had time, you could work out in financial terms what the average taxpayer is worth to the government based on those numbers.