The impact of fiscal drag

Eric Crampton looks at what has happened due to tax brackets not being adjusted in line with wage growth:

If the Government has done this, then the 33% tax rate would be kicking in $101,000 not $70,000. The 30% tax rate would kick in at $69,000 not $48,000.

Eric points out that effectively in 2011 Parliament decided that those earning between the 68th and 85th percentiles should be on the 30% tax rate and now that tax rate covered earners from the 50th through 73rd percentiles.

Yet Labour not only won’t index tax brackets to inflation or wage growth, but they are planning an up to $1,800 tax increase next year for employees and employers.