The original stage 3 tax cuts were never going to end bracket creep. The government’s rejigged stage 3.0 tax cuts are not going to end bracket creep.
Whichever party wins the next election, and the election after that, and the one after that, will have to deliver personal income tax cuts of some sort.
Prime Minister Anthony Albanese has talked up the government’s tax plan in parliament. But more tax cuts will be needed.Credit: Alex Ellinghausen
There are two problems about the whole issue of the tax cuts and what they mean to future taxpayers. One problem is the ignorance about the very meaning of “bracket creep”, and the other is that neither the government nor the opposition is being upfront about the federal budget’s growing reliance on personal income tax.
When the original seven-year tax plan was announced by then treasurer Scott Morrison in his 2018-19 budget, he declared it was all about “protecting what Australians earn from bracket creep”.
Axing the entire 37 per cent tax bracket meant, he said, that most working Australians would “likely never face a higher marginal tax rate through their entire working life”.
But bracket creep is not all about your higher marginal tax rate. The term gets used by those who want a flatter, less progressive tax system but are afraid to admit it.
Tax boffins use the term “fiscal drag” as that covers the small proportion of people who move into another tax bracket every year plus far more who pay a greater share of their income in tax even though they stay in the same bracket.
Under both the original stage 3 and Prime Minister Anthony Albanese’s stage 3.0, the average tax rate for all Australians will grow over the next decade. In other words, bracket creep is not dead, buried or cremated but continuing on, alive and well.
The creep never ends. Both sides know more tax cuts are needed
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11.02.2024
The original stage 3 tax cuts were never going to end bracket creep. The government’s rejigged stage 3.0 tax cuts are not going to end bracket creep.
Whichever party wins the next election, and the election after that, and the one after that, will have to deliver personal income tax cuts of some sort.
Prime Minister Anthony Albanese has talked up the government’s tax plan in parliament. But more tax cuts will be needed.Credit: Alex........
© The Sydney Morning Herald
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