The take home message from the recent budget was jobs and growth. We know this because Scott Morrison repeated this mantra 13 times in a 30 minute speech. He also repeated the word plan 21 times, as if to reinforce the idea that economic thought bubbles (like giving States taxing powers) were a thing of the past. And following the speech, Liberal MPs dutifully followed their talking points and repeated key words Ad Nauseum, without actually saying very much.
The only plan the government seems to have is to cut tax for small business and the wealthy, and, over the next 10 years, cut tax to bigger and bigger businesses.
But where is the evidence that this approach leads to more jobs?
And, setting aside for a moment the significant problems of advocating for never-ending growth on a resource-constrained planet, where is the evidence that it leads to growth?
Mike Seccombe pulls the ‘tax cuts leads to more jobs and growth’ approach apart in The Saturday Paper.
In 2012, the US Congressional Research Service looked at the effect of reducing income tax rates since 1945.
It found that, in 1945 the top marginal tax rate was 90% but by 2012 it was 35%, and stated: “Analysis of such data suggests the reduction in the top tax rates have had little association with saving, investment or productivity growth.”
It also found that “the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution”.
The Research Service also found that the approach increased growth in inequality (an issue we touched on in a previous blog).
But what about the Australian experience?
Investment - Bureau of Statistics data show that, since 1960, private business investment in Australia has trended slowly down as a share of GDP. Before the late 1980s, corporate tax rates averaged well above 40%. Since then, have been progressively reduced to 30%. But there has been no increase in investment as a result.
Economic growth - Up to 1988, the economy grew, on average, by 3.8% a year. Following reductions in corporate tax rates, growth dropped to 3% and is currently forecast at 2.5%.
Employment and Wages - The data show unemployment rates were lower when corporate taxes were higher, and that, since company tax rates have been lowered, the share of GDP going to wages has declined.
This government has asked as a part of its re-election pitch… who do you trust on the economy?
A sane person certainly wouldn’t trust the Coalition, given the deterioration we have seen since they took charge.
I would suggest putting more faith in a Nobel prize-winning economist such as Joseph Stiglitz who says it is “Those at the top spend far less than those at the bottom, so that as money moves up, demand goes down.”
Numerous Coalition policies are shifting wealth towards the top… to those who won’t spend. It doesn’t take a rocket scientist (or a Nobel Prize winning economist) to tell you that their plans will have disastrous economic outcomes for most Australians.
It’s a recipe for more job losses, less growth, more inequality and social problems, growing deficits, and even more tax cuts for the wealthy.
Who can we trust on the economy… not Scott Morrison for one. And although you wouldn't know it if your only news was from the mainstream media... the Greens do have an economic plan.
by Wendy Tubman
The Townsville Greens will publish blogs considered to be of merit. The opinions expressed are those of the Author.