Inflation is already a tax on everyone though. Bracket creep is real, and the govt essentially gets more tax revenue than before. So brackets should move.
To the question of whether the proposed changes are too low/high… ? I don’t know. Haven’t really looked at it that closely. But I do think the abc piece was more opinion than analysis.
As I said in the other thread, looking at the tax revenue forgone by the changes represents around a 3.6% reduction in annual tax revenues. Compared to inflation at around 7%. Problem is the inflation effects on tax are regressive and most quickly impact taxes like GST that are immediate on consumption.
Interested how you’d use taxes to tame inflation. Did you mean increase tax rates? To try and curb spending?
Monetary policy tries to reduce inflation by reducing the amount of money available for consumption, i.e. the money supply. The problem is that the cost of interest rates are borne by mortgage holders and landlords. This in turn impacts low to middle income earners.
Older, wealthier consumers tend to have very low levels of debt. Typically less than 20% of their overall asset pool. So the impact of raised interest rates on them is very muted and they go on consuming and driving inflation. If on the other hand you change tax rates by a few percentage points in the upper brackets, they notice and respond quickly.
If you eliminated tax creep by indexing tax brackets you would get a situation where everyone's tax bill would change every year. Some people see that as a problem for personal budgeting, but I see that as a perfect opportunity to allow the tax rates to also change a little bit every year to control the money supply in a progressive (in a taxation sense) way.
Interest rates for a business are a bit of wash. If they are low, inflation is low and businesses don't really need to pass them on. If they are high, inflation is high, so it's easy to pass on the cost to consumers.
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