The Grattan Institute has called for the federal government to lift the GST rate from 10 per cent to 15 per cent as part of an overhaul of the budget.
The think tank also pushed for the tax to include all food items, ending the current exemption for grocery staples.
A report from the institute, released on Monday, said the proposal would generate $76 billion per year, which could then flow through to tax cuts for low-and-middle-income earners and expanded welfare payments.
Lead author and institute chief executive Aruna Sathanapally said the overhaul was needed to repair state and federal budgets.
"Outside of the COVID pandemic, the last time Australia's national public debt owed this much, the country was still paying off debt from a world war," she said.
Commonwealth debt topped $1 trillion in recent months, although Australia's debt as a share of the economy is lower than most of its developed peers.
The increased tax income would allow for JobSeeker and Youth Allowance to rise by 20 per cent, while rent assistance would go up by 50 per cent to offset the higher GST costs.
"There are no easy paths back to budget sustainability," Dr Sathanapally said.
"But with smarter spending decisions and a tax system that raises sufficient revenue to care for our ageing population, both current and future generations can be better off."
The proposed changes would leave a low-income, single-parent family $150 a week better off.
Higher-income working families would pay $162 a week more under the proposal.
Former Liberal treasurer Josh Frydenberg, who is weighing up an attempted return to federal politics, recently suggested the government consider raising the GST to lower income taxes, a proposal rejected by current party leader Angus Taylor.
Several prominent economists have also called for the GST rate to be increased, a measure the federal Labor government has said is not on its agenda.
The Grattan Institute report also called for the scrapping of a contentious GST deal to benefit Western Australia.
Prime Minister Anthony Albanese has pledged to maintain the 2018 agreement, put in place by the Morrison government, despite a recent Productivity Commission report labelling the deal "perverse".
Under the pact, the resource-rich state receives a guaranteed minimum share of the GST pool each year, regardless of its actual revenue needs.
Other state and territory leaders have urged for a more equitable GST deal to be reached, but WA Premier Roger Cook has labelled opponents of the agreement "east coast clowns".
The Grattan Institute said removing the WA deal would save $6 billion per year.
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