Australians paying thousands more income tax than a decade ago

The soaring hike in income tax over the past decade confirms a long-term trend towards workers bearing more of the load of funding bigger government.

Income tax rates have soared in the past decade, analysis shows.

Australians are paying on average 30 per cent more income tax per person than a decade ago, even after accounting for inflation, confirming a long-term trend towards workers having to bear more of the burden to fund bigger government.

Analysis by The Australian of budget figures reveals personal income tax payments in real per capita terms have jumped from $6556 in 2013-14, to a projected $8617 in 2023-24.

Economists said the “hidden tax hikes” of bracket creep were partly responsible for the per capita tax take rise, as the commonwealth has become increasingly reliant on revenue from more Australians in jobs and working more hours at higher wages.

Budget figures also show the net national debt is estimated to be worth $15,574 per person by June next year – almost double the $8500 figure in 2014. But years of falling interest rates have helped lower net interest payments on a real per capita basis – from $440 in 2013-14, to $363 in 2023-24, the budget papers show.

Anthony Albanese on Monday tried to deflect accusations from Opposition Leader Peter Dutton that Labor’s second budget, which included almost $14bn in cost-of-living support for financially vulnerable households, had done nothing to alleviate pressures on middle-income earners, who pay a large share of the national tax take.

“Last week’s budget was a budget aimed at assisting vulnerable Australians, taking the pressure off families whilst not putting pressure on inflation. It was aimed squarely at middle Australia,” the Prime Minister said.

“Nothing says middle Australia like making it cheaper to see a doctor. Nothing says middle Australia like making it more accessible to see a local GP.

“Nothing says middle Australia like making childcare cheaper – that will happen on July 1. Nothing says middle Australia like having fee-free TAFE – 300,000 additional places added to the 180,000 … included in … October’s budget. And nothing says middle Australia like taking pressure off inflation by producing a budget forecast … the first surplus forecast for 15 years,” he said.

In a sign of the government’s shifting budget sales pitch on Monday, Mr Albanese used the phrase “middle Australia” five times and Treasurer Jim Chalmers used it six times in their respective press conferences.

The 30 per cent increase in real per capita personal income tax receipts over the past decade is three times the 10 per cent increase in real GDP per capita, using the latest available Australian Bureau of Statistics national accounts data.

According to the Parliamentary Budget Office, workers will contribute 52 per cent, or $319bn, of the estimated total $616bn federal tax revenue in 2023-24, versus 21 per cent from company taxes.

Dr Chalmers has refused to put a cap on tax receipts as a share of the economy, but has repeatedly said Labor’s “position has not changed” on the stage three tax cuts, which start from the middle of next year and mostly benefit middle- to high-income earners who pay the most tax.

Labor ahead of last year’s election promised not to touch the stage three changes, and when in opposition voted in favour of the Coalition’s tax reform in 2019.

The Treasurer on Monday said “we support tax relief, particularly for people on low and middle incomes”. “We want people to get a fair reward for their efforts; that begins with wages, and when the budget can afford to return some bracket creep, that’s a worthy and legitimate aspiration as well.”

CBA head of Australian economics Gareth Aird said the steady creep higher in average tax take from workers was the price Australians were paying for bigger government. “Basically we are all paying more tax as a result of bracket creep. If you’re not giving tax cuts in line with CPI (consumer price index) or WPI (wage price index), then you’ve got people ­incrementally going into higher tax brackets … they are handing over a greater proportion of their income to the government,” Mr Aird said.

Tax as a share of household ­income has increased from a low of 12 per cent around 2010, to more than 16 per cent at the end of last year, Mr Aird said, and was now at its highest since 1999, before the income tax relief associated with the introduction of the GST.

“Bracket creep doesn’t feel like a tax increase, but that’s what it is,” he said.

“It … gives the impression that the public finances are getting healthier, but of course it’s coming from people having to hand over more money in income.

“If a government wants ­government spending to be a bigger share of the economy, then they wouldn’t look to address bracket creep.”

Independent economist Saul Eslake said bracket creep would have accounted for some of the climbing per capita tax take, “and there’s going to be more of that as wages pick up”.

Mr Eslake, a former chief economist at ANZ and Bank of America-Merrill Lynch, said the broader message was that “if nothing is done to the tax system we will become increasingly reliant on personal income tax”.

He said the stage three tax cuts looked more affordable than before the massively improved fiscal position revealed in the budget but tax reform needed to be on the agenda for a popular Labor government before the next election.

Ahead of Wednesday’s key WPI data from the ABS, NAB economists on Monday said they now believed there would be one more rate hike in July or August, to bring the cash rate to 4.1 per cent, but warned of the potential for another move to 4.35 per cent.

NAB chief economist Alan Oster in a note to clients said “a further rate increase to 4.1 per cent could come as soon as the next board meeting in June, especially if this week’s (March quarter) WPI release exceeds expectations”.