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A proposal to lift the $80,001 marginal tax bracket to fix the problem of bracket creep would help the wealthy up to 10 times more than average wage earners, according to an analysis of Treasury data.
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And it would be women who would gain the least, exposing as illusory the twin justifications of relieving the tax burden on ordinary families and boosting workforce participation, because already well-off men would gain the lion's share of the cash.
Grappling with the process of inflation pushing some middle-income earners into the second highest tax bracket of 37 cents – without any increase in their purchasing power – the Coalition is believed to be considering one of the few affordable options open to it of lifting the cut-in point from $80,001, possibly to income above $100,001.
For someone for whom a recent inflation-adjusted pay rise has taken them to $82,000, the benefit of a new $100,001 threshold for the 37 cent rate is extremely small – less than the price of a cup of coffee per week at $1.70 or $90 annually. For someone earning above $100,001, the benefit will be tenfold at $17 a week or $900 a year.
The Turnbull government believes the upward drift of wages into the second highest tax bracket is taxation by stealth and is placing an undue tax burden on ordinary households. It says this also creates a fiscal drag on economic growth via reduced spending and a cost-penalty against greater workforce participation.
But a yet-to-be released Australia Institute assessment of setting the threshold higher shows the dollar benefit for low and middle-income earners would be either nil or marginal, with a far greater benefit likely to flow from relief at the bottom of the scale.
It says the main beneficiaries of lifting the $80,001 threshold – which is already above average weekly earnings – would be high-income earners for whom a larger slice of income is taxed currently at the 37-cent rate.
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Those earning above $100K would get an annual tax cut of 10 times the benefit of someone who, for example, had just tipped over into the second highest bracket with an income of, say, $82,000.
And because women take up more lower-paid jobs in the labour force, including more part-time positions, the benefit to them, in many cases, will be nothing at all.
The progressive think tank's modelling shows the cost to the budget would be in the order of $1.7 billion annually, of which women will get about a quarter of the benefit, or 27 per cent – compared to men with 73 per cent.
A key justification of addressing bracket creep is that it is a dampener on workforce participation.
The findings suggest the "growth dividend" of lifting the $80,001 threshold has been exaggerated and that gains would be far higher if other impediments to increased work hours were offered to women, such as more affordable and accessible childcare, rather than increasing the post-tax income of higher paid men.
The Australia Institute's assessment cites Treasury data to show that women make up four in 10 people earning above $80,000 (39 per cent) and that this numerical disadvantage deepens as income rises so that at $180,000 it is fewer than three in 10 (28 per cent).
The government had previously nominated returning "bracket creep" to average PAYG taxpayers as a a top priority of its tax policy but has recently downgraded that goal on cost grounds in favour of slowing it into the future.
Speaking mid-week, Finance Minister Mathias Cormann said of bracket creep that it was now a matter of what the government "can sensibly afford".
"Obviously ,given what is happening in terms of comparatively lower wage inflation and what is happening in terms of comparatively lower inflation right now, bracket creep, to the extent that is it a problem, and it is, it is slightly less of a problem than it was," Senator Cormann told ABC radio.
His comments followed an appearance at the National Press Club by Treasurer Scott Morrison, who signalled the switch from the previous promise of returning Canberra's windfall revenue gains, to a more modest election-year goal of arresting the process from now on as he admitted "it would be very difficult to deal with past sins".
"But there is modest potential to deal with the fact that other future sins could be committed in this area," he said
"We may be able to prevent that outcome."
That prevention is likely to take the form of the upward adjustment of the 37 cent margin.