Luci Ellis, Westpac’s chief economist, says there’s a big case for increasing tax thresholds each year. Without end, taxes will keep rising forever.
A former senior economist for the Reserve Bank has urged an overhaul of the way the federal government taxes income and assets, including an end to bracket creep, while arguing that high interest rates are hitting people who don’t even hold a mortgage.
The rejigged stage 3 tax cuts, worth more than $23 billion in their first year of operation, begin on July 1. A person earning $100,000 a year will get a $2279 annual, or $44 a week, tax cut. “Lifting tax thresholds at a fixed rate retains the stabilisation properties of fixed brackets while avoiding the bias to higher taxation over time. Without periodic tax cuts, the share of income paid in tax will rise forever.”
Tax cuts would flow to low-income earners as well. Someone on the minimum wage of $45,900 a year would be $303 a year better off.Independent economist and budget watcher Chris Richardson said the single-year cost of the change would be at least $4 billion, which would be repeated every year the thresholds were varied.
The government has previously rejected indexing tax thresholds to inflation, a practice last used for 18 months by the Fraser government in the late 1970s. The Coalition has promised to deliver tax reform but has yet to reveal the scope or size.
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