A fortnight ago I argued in no uncertain terms why the Turnbull Government should junk its planned company tax cuts and instead redirect the money that would have been spent into infrastructure projects.
Yesterday, Fairfax’s Peter Martin argued along similar lines:
[Turnbull’s] embrace of very expensive, very big company tax cuts might do a lot of harm – not because company tax cuts are a bad thing in themselves (on balance after many years they appear to boost economic growth, although their effect on national income is uncertain) but because they are so incredibly expensive.
The modelling conducted for the Treasury finds that cutting the company tax rate from 30 to 25 per cent as the Coalition plans would cost $11.3 billion per year. The government would get back a chunk of it ($3.1 billion) in higher income tax collections from shareholders whose imputation benefits would be cut, meaning Australian tax-paying companies would get no benefit, leaving it $8.2 billion per year out of pocket. For that money, or for a lot less, Turnbull could boost the economy right now when it’s needed.
Stephen Anthony, a multiple BusinessDay Forecaster of the Year, says this year we are a “one-trick pony”. Mining investment is continuing to slide, other businesses are far too cautious to fill the gap and the only big driver is home building. When it comes off, there’ll be little happening. The obvious way out is for the government to borrow itself (using extraordinarily low rates), allocate the money to worthwhile projects pre-identified by Infrastructure Australia, and then farm out the building work to the private sector. The projects that are moneymaking can be sold off later to passive investors who are desperate for low-risk returns.
Well said. Give the big business infrastructure projects, not corporate welfare.
