Everyone knows about income tax bracket creep. Wages drift up with inflation, taxpayers slide into higher brackets, and the Commonwealth quietly rakes in more revenue without lifting a legislative finger.

It is the oldest trick in the fiscal book.

What gets far less airtime is that the states and territories are also big beneficiaries of inflation.

Inflation pushes wages higher. Higher wages mean bigger payroll tax bills for every business already in the net. That is the first hit.

The second hit is sneakier.

As wage bills climb, more businesses cross the payroll tax threshold for the first time. They did not have high payrolls yesterday. Today, on paper, they do. Welcome to the club. Here is your invoice…

The only way out is to sack staff to stay under the line.

So, the choice for a growing small business becomes: pay the tax or shed the jobs. Neither outcome is good for the worker, the owner, or the broader economy. But it is excellent news for state treasuries.

Then there is the GST. It is a tax on the price of nearly everything you buy. When prices rise, the tax take rises in lockstep, automatically, with no rate change required.

Every grocery shop, every cafe meal, every tradie invoice that gets repriced upward sends a bigger slice into the state and territory coffers. The river of GST gold keeps swelling, and it all flows downstream into the sewers of state spending.

Here is the punchline. The states and territories set policies that contribute to inflation. Land use restrictions that strangle housing supply. Energy interventions that push power prices up. Wage settlements in their own bloated public sectors that ripple outward. Useless and overpriced infrastructure (see Victoria and Tasmania, especially).

But the political pain of inflation lands almost entirely on the Commonwealth. Voters yell at the Prime Minister. They yell at the Treasurer. They yell at the Reserve Bank.

The Premiers? They keep their heads down.

It is a beautiful arrangement, if you happen to be a state Treasurer. No wonder they have no incentive to change a single thing.

The next time a Premier shrugs about cost of living, remember: their budget is quietly feasting on it.