Treasurer Scott Morrison has confirmed that the Turnbull Government will persist with its policy of progressively reducing the tax rate for all companies, claiming they are essential to fuel investment, jobs and wages growth. From The AFR:
“We’ve had significant success already in delivering tax cuts for small and medium-sized businesses and we’re looking at being able to continue to pursue the full tax cuts right across the board because we know that if you tax your economy less it grows more”…
“It stands to reason, it’s a sensible economic policy, it’s an economic policy that supports the growth and a stronger economy that guarantees essential services that Australians rely on.
“We are going to continue to pursue the full tax cuts right across the board”.
“… we’re also committed to this policy because we know it delivers a stronger economy that means more jobs, more investment and the guarantee for the essentials.”
Meanwhile, the truth of the likely impact from cutting company taxes has been revealed in the US, with corporate America poised to unveil record share buybacks. From the Financial Times:
US companies are expected to shower investors with a record amount of share buybacks in the current earnings season, as corporate executives take advantage of major tax cuts…
S&P 500 companies have already announced about $167bn of new buyback authorisations this year, and analysts at JPMorgan predict that trend will accelerate this quarter as boardrooms digest the full scale of the tax cuts passed in December…
Overall, US companies will buy back about $800bn of their stock this year, the bank forecasts, up from $525bn in 2017, and boost dividend payouts by about 10 per cent to a record $500bn.
President Donald Trump and the Republican-controlled Congress have lauded a potential upswing in investment by US companies following the tax cuts, but strategists at Goldman Sachs expect a heftier increase in buybacks and dividends…
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None of this should be a surprise. In January, Moody’s credit rating agency said that it did “not expect [US] corporate tax cuts to lead to a meaningful boost in business investment”.
It’s trickle-down nonsense to believe that cutting company taxes will benefit ordinary workers. Instead, they’ll be left paying off an even bigger Budget deficit.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
