Bracket Creep Explained: The hidden tax cutting into your earnings

Bracket creep chips away at living standards, especially those of younger generations.
Australia’s younger workers have the most to lose from bracket creep because bracket creep is regressive and hits harder for those earlier in their careers and making less money.
Young people feel the loss of income from a tax increase more acutely than those later in their careers with higher incomes and more wealth.
For those who are on lower incomes, even a small increase in nominal income leads to a larger increase in their overall tax rate.
Young people have less bargaining power and may struggle to convince their employers to make cost-of-living adjustments to their earnings, let alone the pay rise needed to compensate for both inflation and a higher tax rate due to bracket creep.
Periodic tax cuts only help temporarily; they barely scratch the surface in offsetting bracket creep’s insidious impact.
To genuinely tackle this issue, Australia needs a long-term solution that does not depend on the whims of politicians.
Do you really want to rely on politicians to protect you from tax hikes you didn’t vote for?
#economics #tax #income #incometax #earnings #savemoney
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[@jamesjackson4736]

Flat tax. No bracket. No creep.

[@tonyoostenbrink7808]

Canada has experience with bracket creep (aka the stealth tax, or Pick Pocket tax). It was introduced into Canada's tax system by Brian Mulroney's gov't in 1990 (brackets and credits would rise only by inflation above 3%, eg. brackets would rise by 1% if inflation was 4%). By the end of the 1990s Canadians were screaming about high taxation (although 99.999999% of Canadians did not understand WHY they were paying so much), and the Canadian tax system was finally re-indexed to inflation in 2000 by the Finance Minister Paul Martin. Now, starting in 2023, the stealth tax has re-emerged and is primarily impacting low-income Canadians. Here's why: the official inflation rate for indexation of gov't benefits and the tax system was 6.3% but the personal exemption (the income at the bottom not taxed) rose by only 4%. Middle-class and higher earners don't care about the extra $50 in tax but it is certainly felt by the working poor judging by the growing line-ups at the food banks. The Canadian business media and financial institutions are saying NOTHING about this, but then again, they said nothing in the 1990s either. So it's good to see a YT video on the subject even if it is about Australia's tax system. p.s. I subbed this channel after listening to the Mearsheimer/Varghese discussion awhile back.

[@europa_bambaataa]

Such a slow and somber to say "tax brackets should be adjusted to inflation"

[@ianleuchars8032]

I would like to see some numbers. I think this situation is a super marginal situation. In this example the individual must have been just under the bracket.. and the raise must have been so small to not cover more than the inflation of the cookies..

[@TheShorterboy]

the poor the tax free threshold needs to be CPI indexed

[@Flipflop437]

I believe the U.S. adjusts the brackets and standard deductions for inflation every year. That’s strange the Aussies don’t do that.

[@authenticallysuperficial9874]

They do not do so every year. And when they do, it does not correspond to the real debasement of the currency.

[@apu_apustaja]

Why the HELL is anyone still paying tax at all!?!? Just STOP. They can't put you all in jail. Your money is CLEARLY being wasted at best, and at worst used for evil.

[@michaelmcdonald3275]

100%

[@TiagoAzevedo]

It depends on the country but in my country I can go to a hospital and leave without paying a cent, the roads are manteined, the schools are free. We sure have problems: our police is underbudgeted, our armed forces underpaid, the justice a bit slow, the railway needs attention, but in general I rather pay taxes than live in a shithole where education and health aren’t free. And you’re wrong. The powerful would rather have majority of the population die by force rather than not collecting taxes.

[@anonymous-zw1nb]

I bet she's awful to date

[@emiliedye7618]

This comment is too funny. Why?