This paper reflects on shortcomings in the personal tax reform debate ahead of the 2025 federal election. It questions the degree to which the ‘tax-cutting’ claims of successive governments stand up to scrutiny when one looks beyond the headlines to the real tax burdens experienced by Australia’s taxpayers. The author argues reforms styled as tax cuts are, in reality, often just giving back to people what the tax system is taking away as a result of what economists refer to as ‘bracket creep’.

Key insights

• Election promises of cuts to income tax rarely stack up to their claims and fail to offer meaningful tax reform.
• Promised reductions in tax are usually quickly reversed by bracket creep – often before the change is even implemented.
• Because tax thresholds are not indexed for inflation, the government is continually raising taxes in a way that is not transparent and, worse still, is regressive – it affects those on lower earned incomes the most.
• Despite extensive claims about tax reform over successive governments, today’s typical earner is only $20 per week better off in real terms, and average tax rates have barely changed from a decade earlier.
• The proposed reductions in personal tax rates will be both marginal in terms of the benefit to working families and have a negligible effect on women’s labour supply.
• The election pledges should not be seen as a structural tax reform proposition and highlight the need for real tax reform in the form of indexation of tax thresholds.