MONDAY, 4 DECEMBER 2017
Last week, by a vote of 51 to 49, the US Senate passed a major corporate tax cut.
The bill has several similarities with the corporate tax cut being debated here. A survey by the University of Chicago found that 37 out of 38 US economists said the GOP bill would increase the deficit. The 38th later said they didn't understand the question.
In Australia, an Economic Society of Australia survey of 31 economists found two-thirds agreeing that ‘Australia will receive a bigger economic growth dividend in the long run by spending on education than by offering an equivalent amount in a tax cut to business’. Treasury's own estimates say that the government's big-business company tax cut would deliver only a 0.1 per cent increase in personal income - in the 2030s.
The US tax cut bill will be regressive, with middle-income tax breaks being temporary but tax breaks to private jet owners being permanent. Likewise, the Australian company tax cut would be paid for by increasing taxes on low- and middle-income-earning Australians - a measure that Labor has opposed.
There are similarities too in the handwritten nature of the US tax bill and the fact that the Turnbull government is now back to attempt to redraft its own changes to small business tax cuts. The government says that Australia's company tax is too high, but the US Congressional Budget Office's analysis ranks Australia's 30 per cent rate as 10th in the G20.
If the US bill passes committee, it will move us to ninth - hardly a reason for a budget-busting, regressive tax change that won't tangibly boost growth.