Assistant Treasurer Josh Frydenberg believes it'll be "bad news" for the economy if the government doesn't do something to curb bracket creep.
Treasurer Joe Hockey has pledged to take personal income tax cuts to the next federal election, warning too many Australians are being pushed into higher tax brackets as a result of wage inflation.
Mr Frydenberg has told ABC radio bracket creep will discourage people from working for longer and reform is long overdue for a tax system that's changed little since the 1950s.
The Greens accused Mr Hockey of starting a "tax cuts arms race".
The minor party's treasury spokesman, Adam Bandt, is worried cutting income tax will just deepen Australia's revenue crisis and end up with services getting slashed.
He suggests the government look at phasing out tax breaks like negative gearing and capital gains exemptions instead.
Shadow treasurer Chris Bowen dismissed Mr Hockey's call as another "thought bubble".
"He needs to put some meat on the bone and talk about where the money for these alleged tax cuts is coming from," he told ABC radio on Monday.
Mr Bowen acknowledged there was an issue with bracket creep but declined to explain how Labor would tackle it.
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