This morning’s comments by Minister for Finance, Matthias Cormann, downplaying the problem of bracket creep, are misguided and wrong, according to Centre for Independent Studies (CIS) Research Fellow Michael Potter.
“Modelling by the CIS indicates that the average full-time worker will be paying an extra $1,885 in tax due to bracket creep in three years’ time. This is over $36 per week,” Mr Potter says.
“It is wrong to downplay this cost because of low inflation or low wages growth. It is a real and genuine cost to all Australian taxpayers.
“We estimate the total cost to be $12.5 billion next year and $16.5 billion the following year. This cost should is not small, and fixing it should not be postponed.”
“The Minister is actually discounting the arguments against bracket creep so clearly put by his own colleague, Treasurer Scott Morrison.
“In his speech yesterday at the National Press Club, and in modelling released last week, the Treasurer highlighted that if nothing is done about bracket creep, average tax rates will increase to a record level of 26.6% in 2020-21 — and this tax increase will cut economic growth by at least 0.35%.
“This accords with analysis by the CIS that found bracket creep is a costly, inefficient and growth-destroying tax increase that must be addressed urgently, preferably by indexing tax thresholds to wages growth”.
Michael Potter is a Research Fellow in the Economics program at the Centre for Independent Studies, and co-author with Robert Carling of the report Exposing the Stealth Tax: the Bracket Creep rip-off and has updated modelling of the costs of bracket creep.