The big problem with Malcolm Turnbull’s $65bn big business tax cut comes with absolutely no guarantees that the multinationals who receive it will increase investment in Australia, or even invest any of it onshore.
In fact, the Guardian reported that Goldman Sachs, the investment bank once chaired by Turnbull himself, found that much of the benefit of the tax cuts would flow to offshore investors.
There are also no guarantees that businesses will put on more staff, or boost the wages of workers who are struggling to make ends meet.
That’s because there’s nothing at all stopping the tax cuts from flowing into executive bonuses, increased dividends or share buybacks.
The Government’s insistence that their company tax cuts will trickle down to middle Australia relies on little more than ideology and crossed fingers.
When treasurer Scott Morrison was asked recently how he could be sure that the benefits would even reach Australian employees he pointed not to detailed analysis, but to “economic history” and “lived experience over a very long period of time”, and then the very recent Trump tax cuts.
But that experience in the US tells a different story to the one being pushed by Morrison and others.
There are already clear signs that American businesses are, as the New York Times puts it, spending “more on themselves than on wages”.
American companies have taken Trump’s tax cuts and ploughed them into buying their own shares; a great move for senior executives and shareholders who’ll benefit from a bolstered stock price.
But not so welcome news for workers.
Here in Australia, there are many reasons Labor opposes Malcolm Turnbull’s tax cuts for the top end of town. They are unwise, unfair and unaffordable.
Unwise, because we simply won’t get enough economic bang for 65 billion bucks. Even treasury’s own modelling shows the benefits are negligible and down the track.
Unfair, because they favour the top of town at the expense of middle Australia, who are asked to pay higher income taxes and cop cuts to hospitals, schools and pensions to pay for them.
And they’re unaffordable because of the structural damage they do to the Budget.
Already this year’s deficit is eight times bigger than predicted in Joe Hockey’s first Budget in 2014, net debt has now doubled since the Liberals took office, and gross debt has crashed through half-a-trillion dollars for the first time ever and growing, with no peak in sight.
Last week’s National Accounts showed the Australian economy is growing slower than expected; investment is weak; wages are stagnant; living standards are going backwards; and the wages share of income has declined in recent years as the profit share rose substantially.
We won’t address these challenges with a company tax cut which can be sprayed around the world in executive bonuses, dividends and share buybacks, not invested onshore in Australia.
A tax cut which is just as likely to end up in Stockholm as Sydney; Boston as Brisbane.
And a tax cut which might be welcomed by senior executives and shareholders but not assured of boosting the Australian economy enough to justify the massive cost to taxpayers.
We need to find a better way.
Because without these guarantees, only one thing is certain: middle Australia can’t bank on Turnbull’s tax cut to boost onshore investment, jobs and wages and grow our domestic economy.
This piece was first published in the Guardian Australia on Monday, 12 March 2018.