Australian Taxpayers’ Alliance – Sydney – Week 4 – The Stealth Tax

Wesley Goh

According to Trading Economics, Australia takes the 18th spot for having one of the highest personal income taxes in the world. Despite that, the government has failed to adequately address the bracket creep which is stealthily syphoning wages from Australians.

Bracket creep occurs when wages at face value have increased but so does the cost of all other goods and services in the country. This creates a net loss because the taxpayer’s relative position has remained the same while their taxes have increased by a whole tier without them even knowing.

Its adverse effects impact low to medium income families the hardest, followed by effects cascading across the nation by reducing overall take-home wages. This in turn discourages investment, employment and innovation while encouraging tax avoidance, an exodus of skilled workers and reckless government spending leading to a sluggish economy.

Although the Morrison government recently addressed the issue briefly in their 2018 budget proposal (by reducing tax payables per dollar in each threshold), their solution does little to resolve the full scale of the problem that comes with a bracket creep taking full effect in the long run.

A report by the Centre For Independent Studies estimates that the bracket creep will raise a tax revenue of $50.7 billion for the government over the next 3 years, with tax payables increasing by $16.7 billion in the year 2018-2019 alone.

It is time the Australian government took accountability to serve its people and the nation by addressing the bracket tax head on. The only credible long term solution to a bracket creep is by indexing tax thresholds to inflation rates which will ensure that tax payables increase and decrease proportionately to changes in real wages, eliminating any harmful effects it would have to society and the economy.

Bracket creep is one of the many inadequacies of central planning. The Australian Taxpayers’ Alliance is working to eradicate injustice and preserve the individual freedoms of hardworking Australians.