Grattan modelling of the government’s Personal Income Tax Plan highlights costly cuts to taxes for high-income earners
Most of the revenue reductions from the Turnbull Government’s Personal Income Tax Plan are the result of lower taxes on high-income earners. Grattan Institute analysis shows that once the three-stage plan – including removing the 37 cents-in-the-dollar tax bracket – is complete, $15 billion of the annual $25 billion cost of the plan will result from collecting less tax from the top 20 per cent of income earners, who currently have a taxable income of $87,000-a-year or more. The plan, announced in the 2018 Budget, will do little to unwind bracket creep’s gradual reduction of the progressivity of the tax system. Even under the plan, average tax rates are forecast to be higher for all taxpayers in 2027-28 – except for very high-income earners who are effectively shielded from bracket creep by the plan.