You’ve gotta wonder about the intellect of Treasurer Scott Morrison.
Yesterday, Deloitte delivered a sobering assessment of the Commonwealth’s finances, forecasting a further $24 billion blow-out in the Budget deficit over the next four years.
And today, ratings agency Standard & Poors warned (yet again) that Australia risks losing its AAA sovereign rating if it cannot bring the Budget deficit under control.
Yet despite these inconvenient truths, Treasurer Scott Morrison is making a renewed push for support for the Government’s $48.7 billion company tax cut, which would see the corporate tax rate fall from 30% to 25% by 2026-27. From The AFR:
Mr Morrison said they were needed to stimulate wage growth and profits, both of which generated revenue for the government.
Mr Morrison said he hoped Labor would spend the Christmas break reflecting on the need for the tax cuts before the legislation was put to the Senate in the new year. He said Labor was now posing a “risk” and its position on the company tax cuts would “leave the economy stranded”.
“Only now out of cynical politics do they refuse to match what they have always said,” he said in a reference to previous statements of support by Labor for business tax relief.
“They are not just a bunch of cynical populists.”
Labor’s shadow treasurer, Chris Bowen, responded in kind, refusing to support the full company tax cut:
“The Turnbull government should stop ignoring all the warnings and immediately abandon its $50 billion tax cut for big business, which will smash the budget when Australia can least afford it”…
I have explained numerous times why the Coalition’s company tax cut plan is plain stupid, namely:
- most of the benefits would flow offshore;
- national income would be reduced;
- the Budget would lose revenue, resulting in tax rises or expenditure cuts elsewhere (lowering jobs and growth); and
- Treasury’s own modelling showed almost no benefits to jobs and growth.
With the Federal Budget facing immense structural pressures and a “revenue problem”, and Australia’s AAA credit rating on the line, there is no sense in gifting tens-of-billions of dollars to foreign owners/shareholders, and in the process worsening the Budget position and lowering national income.
Mark Twain once said: “When you are in a hole, stop digging”. Treasurer Morrison would be wise to follow that advice and abandon the Coalition’s ill-considered company tax cut.
