Greg Jericho
Chief Economist

The past couple week’s Angus Taylor has been going around the marginal seats yelling about how people are paying on average $3,500 more in tax than they were in June 2022 because of “Bracket creep”

And today The Daily Telegraph is running with a story about how the poor Gen Z are going to be hit the most.

Ok, let’s get into this.

First off. Please. Yes, people are paying more tax than they were 3 years ago because (here comes the shock) people are paid more than they were three years ago. That is the basis of our tax system – you earn more you pay more tax.

And as for young people being “hit” the most?  Well, you could have said that every year for the last… err when was income tax invented?? Young people always start from smaller incomes and get more money because they get a better paying job, get more hours, get more experience, get more qualification etc etc. All of this means they earn more and… yes pay more tax (shocking I know, but good on Angus Taylor for discovering how our tax system works).

Getting a better paying job and then paying more tax IS NOT BRACKET CREEP. That is just getting a better paying job and as a result paying more tax – which is how it should work because when you have more income you can afford to pay more tax! Bracket creep is when you get a pay rise that keeps pace with inflation but you end up paying a higher tax . It mostly affects low-middle income earners because a greater percent of their income is untaxed than is the case for someone on say $150,000

The Daily Telegraph story suggest that a full-time worker aged 20-24 has got a 17.1% pay rise since June 2024. Firstly, congrats to them! That is well above the 9.5% pay rise everyone else has got on average! Also “average” is doing a lot of heavy lifting here. Only around 54% of workers aged 20-24 have a full-time job compared to about 70% of the rest of us. So he’s cherry picking a group that already are doing better than most.

But here’s the kicker – the biggest reason why anyone earning around $67,000 that Taylor says he now cares so greatly about it might be paying more tax is because in 2022 the Morrison government ended the $1,500 tax break known and the “Low-Middle Income Tax Offset”. That $1,500 hit was a 2.2% increase in tax for someone on $67,000.

If Angus really cares about bracket creep he would admit getting rid of the LMITO was a mistake that hurt the very people he are now saying have been hit. But if you listen to him he NEVER mentions LMITO

And here’s the other kicker – the old Stage 3 was terrible for helping bracket creep – because most of the tax cuts went to the richest. That FT 22 yo worker on $67,000 got a $1,306 tax cut when the Alp changed the stage 3 tax cuts. Still not enough to make up for the $1,500 loss of the LMITO but a goodly amount all the same. But had the Old Stage 3 gone through as Angus Taylor wanted, that 22yo would have only got a $502 tax cut and be $804 worse off.

Oddly Angus Taylor is not saying much about that now.