Congratulations, we’ve passed Tax Freedom Day. We’re no longer working for the government and have started working for ourselves.
It has taken 102 days for Australians to pay off the annual tax burden. In this period, ending on 13 April, the average Australian has sacrificed $19,200 to pay for government services at all levels — federal, state and local.
But that isn’t enough. Despite taking 28% of the income created by every Australian, this level of taxation does not cover rising government expenditure. Across Australia, governments collectively ran deficits of $43 billion last year and are set to run deficits of $49 billion this year.
Governments are effectively borrowing to finance day-to-day operations. With these deficits we can look forward to working even longer in future years to pay off taxes.
Since 2011, Tax Freedom Day has grown steadily later. This year, it falls one day later than it did in 2016. Present forecasts indicate little relief for taxpayers in the coming years, with Tax Freedom Day set to be later every year.
This is a growing tax burden, particularly driven by bracket creep in personal income tax which is adding 0.3% of GDP to the tax burden each and every year — and this figure is cumulative. Bracket creep is the ultimate stealth tax, a tax increase that would be stridently opposed by every political party if it had to be legislated. But because it happens automatically, protests are muted or non-existent.
Stamp duty levied by state governments is also a growing burden: revenue from this tax across Australia has blown out by 67% over the four years from 2011–12 to 2015–16. And this tax is the most inefficient major tax in Australia.
Governments need to respond to this by arresting spending growth to alleviate the taxation pressure on all Australians.
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