Treasurer Joe Hockey says that the Abbott government will take personal income tax cuts to the next election to combat “bracket creep”, ensuring they are a major poll issue.
Bracket creep is seen as people being pushed into higher tax brackets because of ordinary wage increases and it’s thought to be one of the biggest issues facing the tax system.
Mr Hockey yesterday set out a comprehensive economic case for personal income tax cuts in a speech to the Tax Institute and Chartered Accountants Australia and New Zealand in Sydney.
Mr Hockey’s belief is that the government has no choice but to cut taxes for middle and low income households because the tax system is increasingly penalising them.
The Treasurer has taken a firm line on tax cuts days after multiple cabinet leaks showed the government wants to return the national conversation to the Coalition’s perceived strengths of the economy, jobs and growth.
Mr Hockey warns that without personal income tax cuts, about 300,000 Australians will be moving into the second highest tax bracket in the next two years because of inflation and rising wages.
He says the existing tax system will create disincentives for people wanting to work extra hours, and in some case, from working at all, and that it would not be right to allow so-called “bracket creep” to cover rising government spending.
“Many Australians are not fully aware that they will be paying higher taxes as a result of the stealthy rise of bracket creep,” he’s reported as saying in The Sydney Morning Herald.
Mr Hockey ruled out other strategies for making bringing the budget into surplus, such as reducing super tax concessions for the wealthy. “Now is not the time to hit [retirees] with a new tax,” the Treasurer told Sky News.
However, critics say beyond that the details of the treasurer’s plan are sketchy at best.
Certified Practicing Accountants (CPA) Australia chief executive Alex Malley told The New Daily the vague promise to cut taxes was nothing more than a pre-election “fiscal giveaway”.
“To actually start forcing a conversation around just personal income tax says to me that we’re in a downhill slide to an election and that’s not good for Australia, we need to make some tough decisions,” he said.
“To defer and distract again in relation to tax and tell us what we already knew at a five-star hotel in Sydney is not my idea of leadership. If it wasn’t so tragic it would be funny.”
Do you agree that bracket creep is the biggest issue with the Australian tax system? Is this the issue the government should be focusing on?