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The Australian government wants to give corporations a $48 billion tax cut believing this will help growth and the budget. It will help neither. I posted the following to an article at The Guardian today. See https://www.theguardian.com/australia-news/2017/jan/27/australia-doesnt-need-to-chase-donald-trump-on-corporate-tax-cuts?utm_source=esp&utm_medium=Email&utm_campaign=GU+Today+AUS+v1+-+AUS+morning+mail+callout&utm_term=210611&subid=11379209&CMP=ema_632#comment-92056553

The main effect of a $48 billion tax cut for corporations would be to blow the deficits and debt out even further. There would be no guarantee that companies would invest more or hire more staff if they had a tax cut. Companies will only do this if there is an increase in demand for their goods and services. But with wage increases at a historical low and consumer confidence fairly low, it’s not going to happen. Besides, imagine the banks opening more branches and employing more staff if the banks paid less tax. There’s no way. The banks have made billions in profit for years, yet they close branches and lay off staff. The extra money from tax cuts would probably largely find its way into shareholders’ pockets and a fair chunk will probably be spent on additional overseas holidays (where the money of course leaves Australia) and on more investment properties (which would mean these people pay less tax, and the rich become richer and the poor become poorer paying ever higher rents). 

There is no evidence that corporate tax cuts work. Indeed, the UK and Canada have reduced their corporate tax rates about half a dozen times in eight years but it hasn’t done much at all for growth. The US and Germany have kept their rates the same and their growth, if anything, has been better than the UK and Canada. If there was evidence that corporate tax cuts worked, then everyone would be doing it. GDP would grow and deficits would fall due to more tax revenue. It just doesn’t work like that. The only place it works is in the minds of the hard right. 

It’s no use copying what Trump plans to do. Trump has no idea when it comes to money. When his casino got into trouble in the 1990s (largely due to Trump), the banks had a meeting and one banker was later quoted as saying that Trump didn’t know numbers and it was like he hadn’t taken any economics or accounting courses at college. 

We also should keep in mind that the Coalition’s tax cuts policy is tax plan C. Plan A was to hike the GST from 10% to 15%. That was abandoned when the government realised that nobody liked the idea. Plan B was state income taxes. But that wasn’t popular either and was abandoned within days when it became clear that the idea was impractical and the states didn’t want a bar of it. Then we ended up with plan C: the corporate tax cuts plus cuts for wealthy individuals. 

The Coalition government doesn’t seem to have much more idea than Trump.