The fallacy of the Federal Election ‘tax cut’ contest: time to level the personal tax playing field

As we near the end of the 2025 Federal Election campaign, the hiatus in policy commitments gives us pause to reflect on the quality – or more accurately, the lack of quality – in the personal tax reform debate.

But the great frustration with this debate, as has been the case in following the personal taxation reform agenda for the past decade, is the degree to which ‘tax-cutting’ claims of successive governments stand up to scrutiny when one looks beyond the headlines to the real tax burdens that Australia’s taxpayers have endured.

In fact, what is styled with great fanfare as tax cuts are, in reality, usually just giving back to people what the tax system is taking away as a result of what economists refer to as ‘bracket creep’.

This BCEC Federal Election Briefing Note aims to debunk the fallacy of personal income ‘tax cuts’ delivered to Australian families, and sets forth the argument for an honest debate on personal tax reform.

Key insights

• Election promises of cuts to income tax rarely stack up to their claims and fail to offer meaningful tax reform.
• Promised reductions in tax are usually quickly reversed by ‘bracket creep’ – often before the change is even implemented.
• Because tax thresholds are not indexed for inflation, the government is continually raising taxes in a way that is not transparent and, worse still, is regressive – it affects those on lower earned incomes the most.
• Despite extensive claims about tax reform over successive governments, today’s typical earner is only $20 per week better off in real terms, and average tax rates have barely changed from a decade earlier.
• The proposed reductions in personal tax rates will be both marginal in terms of the benefit to working families and have a negligible effect on women’s labour supply.
• The election pledges should not be seen as a structural tax reform proposition and highlight the need for real tax reform in the form of indexation of tax thresholds.