Bracket creep describes the effect in a progressive tax system where nominal income growth pushes taxpayers onto higher tax rates without an increase in real income. In the context of the 3-stage tax cuts, this seminar and paper will examine bracket creep over the last 7 years, including the question of whether the 3 stages of the tax cuts (both versions) will offset this bracket creep effect at different income levels. It will also consider tax reform options, such as indexation of the personal income tax scale, to offset the bracket creep effects permanently.

Paul Tilley was an economic policy adviser to governments for 30 years, working mainly in Treasury but also PM&C, the Treasurer’s office and the OECD. He has since published a book on the history of the Treasury, Changing Fortunes: A History of the Australian Treasury, and Mixed Fortunes: A History of Tax Reform in Australia will be released in March 2024. Paul is a Visiting Fellow at the ANU’s Tax and Transfer Policy Institute and a Senior Fellow at the Melbourne Law School.