Sisyphus and treasurers face the same problem: the work doesn’t stop

Just as Sisyphus spent his days pushing a rock up a hill, treasurers spend their days dealing with the problems caused by the Australian tax system.

The Parliamentary Budget Office has delivered a fresh boulder to push with its latest outlook on the nation’s budget, which shows the weight being borne by ordinary taxpayers.

Take-home pay for millions of Australians will still be affected by bracket creep, even after the government’s tax reforms.Credit:Gabriele Charotte

When Scott Morrison and then Josh Frydenberg outlined their grand seven-year plan to simplify the tax system, one of the key stated aims was to kill bracket creep.

On the day after the 2019-20 budget, Frydenberg was clear about his grand tax vision.

“That is a very significant development which will ensure that people, regardless of the jobs that they change throughout their lives, may not encounter bracket creep. And that will not be a disincentive for them to work a bit harder,” he told assembled journalists in Parliament’s Great Hall.

But like a Greek myth, bracket creep is impossible to kill.

The PBO’s analysis shows that just a few years after the three-stage tax plan is fully in place, bracket creep will mean about 87 per cent of Australian workers face a higher average tax rate.

It’s not just lower-income earners, although they will face the biggest increase in their average tax bill. Even the highest-paid won’t be able to avoid a tax increase. And women, already short-changed by our tax structure, will be dealt the largest hits.

That bracket creep will also mean the share of government revenue flowing from personal income tax will climb back to where it was just before John Howard and Peter Costello put in place the GST in 2000.

Almost 50 cents of every dollar of government revenue will be ripped out of the pay packets of workers. The share flowing from corporate Australia, however, will fall over the same period.

Everyone in the tax space, from the government to Labor to academics to economists, will tell you Australia needs to move away from taxing income. But the PBO analysis shows as a nation we’re moving in the opposite direction, notwithstanding the government’s tax plans.

It’s not just a Coalition issue. Labor, which tied itself in knots over what aspects of the government’s tax plan to support, cannot run away from the issue raised by the budget office.

That issue is clear: reform of the tax system, particularly for individuals, is not finished. It is never finished.

It has to go beyond tinkering with rates and thresholds.

No matter who wins the next election, the Australian treasurer will be pushing another tax boulder up that hill.

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