Bracket creep set to push up tax by $2.4 billion
FORGET the too-smart-by-half efforts of Finance Minister Mathias Cormann in increasing the fuel excise every six months by the CPI.
The big win for the feds in raising tax revenue is going to be bracket creep (where inflation pushes income into higher tax brackets).
According to the National Centre for Social and Economic Modelling, 1.8 million Australian taxpayers will be forced into a higher tax bracket as a result of bracket creep.
That will mean the Federal Government will pocket $25 million more in tax revenue over the next four years.
In fact, $2.4 billion will be raised through bracket creep next year out of a total of $183 billion - not a bad return on passive action.
Workers will now be noticing they are being stung by a 2% Medicare levy this year, up from 1.5%.
Those earning over $180,000 will also be seeing an extra Temporary Budget Repair Levy disappearing out of their weekly pay packet, taking their tax rate and Medicare levy to 49%, just to make sure that they lose any incentive to work to their potential.
Now it looks like Treasury's expected modest wage growth of 2.75% this year and 3% thereafter will produce the result tipped by NATSEM.
Those now earning just short of $37,000 will enter the 32.5% tax bracket, and those now earning the average of just below $80,000 will begin to lose 37% until they hit $180,000, thereafter 47%.
Add the 2% Medicare levy and we're seeing some of the highest personal income tax rates in the world.
Perennial dope Treasurer Joe Hockey blames Labor for his failure to act on bracket creep, as his Liberal predecessor Peter Costello regularly did during the 11 years of the Howard Government.
Labor, he whines, is responsible for holding up $28 billion in savings through the various cuts he announced in his discredited May budget.
So there you have it. Bracket creep is Labor's fault.
So will be a dip in productivity by high income earners, our engineers and other professionals caught in Hockey's tax trap.