Despite discussion about the benefits of indexing tax brackets to the rate of inflation, this paper shows Australians have been much better off without the solution to ‘bracket creep’. The analysis reveals that if the Howard Government had introduced the current Liberal policy of indexing tax brackets to inflation to counter bracket creep, Australians would be paying significantly more tax today. 

This paper explains the policy being proposed by the Leader of the Opposition, Angus Taylor, and evaluates the impact of his proposal by measuring the impact of such an idea had it been introduced 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.