Opposition leader’s ‘cute’ bracket creep claims don’t stack up

In a post-budget speech, opposition leader Angus Taylor announced a $22.5 billion plan to combat bracket creep, which pushes Australian workers into higher tax brackets due to price inflation and wage growth.

With the intention of kicking off in 2028–29, Taylor said a future Coalition government would lower the two tax brackets for workers earning under $135,000. This, he said, would deliver savings of about $1,000 to 85 per cent of workers within four years.

A similar plan was proposed before the last election, but was blocked by the former opposition leader, Peter Dutton, as reported by the ABC.

Co-chief executive of the Australia Institute, Dr Richard Denniss, said Taylor made a “cute” but inadequate argument that managing bracket creep manually rather than automatically somehow amounted to theft from taxpayers.

If the indexation plan had been introduced when John Howard and Peter Costello were elected in 1996, the Australia Institute found that Australians would actually be paying significantly more tax three decades later.

“Australia Institute research clearly demonstrates that under the current system, favoured by everyone from John Howard to Anthony Albanese, Australian taxpayers are keeping more of what they earn,” Denniss said.

“An average worker is nearly $150 a week better off. Nurses, teachers and police are between $172 and $207 per week better off. Someone doing really well earning double the average income is $255 per week better off.”

The Australia Institute found tax thresholds are much higher now than if they had been indexed to inflation in 1996. It also found that marginal tax rates are lower now than if indexation had been introduced 30 years ago.

Denniss said the current system enables governments to manage the “ebbs and flows” of the national and global economies, allowing them to take into account “things like high inflation, a global pandemic or a war in the Middle East”.

“Similarly, it can hold back a tax cut at a time when it may do more harm than good, like simulating household spending while the Reserve Bank is trying to slow spending to counter inflation.

“It’s a huge stretch to suggest that continuing to do what John Howard and Peter Costello did is stealing from taxpayers.”