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The 'baby bonus' is a good first step in the policy to reduce tax on the family

By Peter Saunders - posted Saturday, 15 December 2001

In the recent election campaign, the Coalition proposed to give back to new mothers who stay at home with their babies some of the tax that they paid when they were earning. The media dubbed this a "baby bonus" – and, predictably, it met with a storm of criticism from social affairs commentators.

One of the first out of the blocks was the self-appointed spokesperson for Australian women, Eva Cox. She detected in the Coalition’s proposal a patriarchal conspiracy designed to drag women kicking and screaming back into the home. The fact that most women want to spend some time with their babies rather than going straight back into full-time work was ignored by Ms Cox who deplored the idea that women might become "homemakers" for a while.

Left-wing academics also queued up to oppose the proposal, though for slightly different reasons. Failing to understand that what is being suggested involves a hand-back rather than a hand-out (for beneficiaries would be getting back some of their own money), the left insisted that the plan is ‘unfair’ because those who have earned higher wages would get bigger refunds. This is like complaining that it is ‘unfair’ for the police to return stolen property to its original owners since those who had most in the first place get most back. Clearly the academic left still seems incapable of grasping that ‘fairness’ is not necessarily the same thing as ‘equality’.


Meanwhile, over at the ANU the Professor of Demography, Peter MacDonald, complained that the Coalition’s proposal represented a step in the wrong direction. Rather than reducing taxation, he wants to increase it.

His concern is that we should reverse the falling fertility rate in Australia, for the birth-rate is now below replacement level. You might think, therefore, that he would welcome a move to reduce the taxes paid by those having their first child, but not a bit of it! Rather than giving parents tax rebates, Professor MacDonald thinks the Commonwealth government should follow high-spending European governments like Norway and France and increase the taxes we pay so that it can subsidise child care facilities and fund more generous maternity and paternity leave.

What all of these critics have in common is the knee-jerk assumption that it is in some way ‘wrong’ for the Government to give tax money back to those who paid it in the first place. They feel uncomfortable with the idea that we should be trusted with more of our own money. They are much happier thinking up ways in which the government should spend our money for us.

Now, it is true that the sums involved in the Coalition’s proposal are pretty paltry – somewhere between $500 and $2,500 per year for up to five years. Clearly (as many of the critics have been swift to point out), a rebate of this size will do little to persuade mothers to stay home rather than go back to work, and it is most unlikely to lead more couples to have children.

What it would do, however, is make a small impact on rectifying the gross inequality that has built up over the last thirty years in this country between families with dependent children (particularly those where one parent stays at home to bring them up) and other types of households.

In her recent book, Taxing the Family, Lucy Sullivan refers to the growth of what she calls "horizontal inequality" in Australia. The problem, put simply, is that the tax and welfare system has increasingly penalised families with children (particularly those where the mother stays at home) with the result that they are today much worse off than single earners and childless couples.


Thirty years ago, a family with two children paid no income tax until its earnings rose substantially above the average level. Today, families on modest incomes are expected to pay hefty tax bills, and the government has got itself into the absurd situation where it then has to try to compensate them with various types of benefits in order to keep their heads above water.

Demands that the government increase subsidies to child care, or pay for enhanced maternity leave, or even (as in Don Edgar’s recent opinion piece in The Age on 31 October), that we introduce a new "carer’s allowance", would all make the current situation even worse. As government spending rises, so the tax burden on ordinary families becomes even higher, and yet more welfare benefits then have to be provided in order to compensate. Round and round we go, taking the money with one hand, giving it back with the other.

In his Age article, Don Edgar reminded us that ‘family policy’ must be understood broadly, to include things like taxation as well as family benefits. But he failed to pinpoint the way in which ever-increasing taxation has undermined family life in Australia.

It is this that urgently demands our attention – much more than subsidised child care, paternity leave or any of the other ideas that are currently so popular among the social affairs intellectuals. If you want to do good for the family, the place to start is with a system of tax credits designed so that working families can once again be self-reliant without the need for welfare payments or subsidies.

The Coalition’s proposal for a First Child Tax Refund is, of course, a very modest step, but at least it would make a start on reducing the absurdly high tax burden under which we expect ordinary families to survive in this country.

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About the Author

Peter Saunders is a distinguished fellow of the Centre for Independent Studies, now living in England. After nine years living and working in Australia, Peter Saunders returned to the UK in June 2008 to work as a freelance researcher and independent writer of fiction and non-fiction.He is author of Poverty in Australia: Beyond the Rhetoric and Australia's Welfare Habit, and how to kick it. Peter Saunder's website is here.

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