Opposition leader Angus Taylor announced the policy in his budget reply speech last month, declaring bracket creep was a "stealth raid on Australians working hard to get ahead" and that by failing to index income tax thresholds with inflation was a form of "stealing" from taxpayers.
The Australia Institute has calculated how indexation would have impacted Australians if John Howard and Peter Costello had introduced it when they were elected in 1996.
Key findings:
- Tax thresholds are much higher now than if they'd been indexed to inflation in 1996.
- Marginal tax rates are lower now than if indexation had been introduced 30 years ago.
- A taxpayer on average weekly earnings is $147 per week better off now than if John Howard had implemented Angus Taylor's current policy.
- A taxpayer on twice the average weekly earnings would be $355 per week better off today.
- A nurse working full time ordinary hours would be $187 a week better off. A teacher would be $172 per week better off. A police officer would be $207 per week better off.
"Angus Taylor makes a cute argument that managing bracket creep manually rather than automatically is, in some way, 'stealing' from taxpayers, but his claim just doesn't stack up," said Dr Richard Denniss, co-CEO of The Australia Institute.
"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.
"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 $355 per week better off.
"The current system enables governments to manage the ebbs and flows of the national and global economies. They can 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 stimulating household spending while the Reserve Bank is trying to slow spending to counter inflation.
"It's a huge stretch to suggest that by continuing to do what John Howard and Peter Costello did is stealing from taxpayers."
