Bracket Creep Set to Push Income Tax to 46 Percent of Total Tax Revenue in Next Decade

When Goods and Services Tax (GST) was introduced to Australia in 2000, income tax accounted for around 36 percent of the government’s total tax take. The new consumption tax was sold to the public partly on the basis that the wider government would have an additional source of revenue—which would be given to the states—and not only would a range of inefficient taxes be abolished, but the future need for income tax increases would be reduced. Income tax as a share of overall GDP duly went down, while GST (substituting for the federal wholes tax) went up. But a study by the Parliamentary Budget Office (PBO) has revealed that personal income tax is headed for a post-GST high of 46 percent of total Australian tax revenue in 2034 due to “bracket creep.” That is where tax brackets remain the same but increases in wages and salaries push an earner into a higher bracket, thus paying more tax....