Grattan Institute: Taxpayers are doing most of the budget repair work

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The federal budget, like any budget, is the end product of a number of different inputs and assumptions on revenue and expenses. They combine to spit out an expected profit, loss or break even result.

But the Grattan Institute’s CEO John Daley, appearing on ABC News Breakfast this morning, said for all the moves to different schemes and entitlements, revenue, and expense measures, it’s actually average taxpayers who are footing most of the bill for the improvement in the budget balance by 2018-19.

If you are wondering how that could be when all the smoke and noise is about other budget measures the answer, according to Daley, is plain and simple old fashioned bracket creep. That’s where wages grow faster than GDP, which kicks wage earners into the higher tax bracket and allows the government a bigger slice of that extra income rather than if tax was indexed to inflation or some other measure.

By Daley’s metrics bracket creep provides just a little under 50% of the budget repair — $25 billion in additional revenue to the government over the next 4 years.

That’s a $25 billion hit to real incomes.

Here’s the chart.

Source: Grattan Institute (supplied)

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