Trump’s corporate tax cuts misses workers, blows-out deficit

By Leith van Onselen

While the Turnbull Government and the Business Council of Australia (BCA) continue to insist that reducing the company tax rate is essential to fuel investment, jobs and wages growth, the impact from the recent US corporate tax cuts continues to disappoint, fuelling little more than a boom in share buybacks. From Bloomberg:

American companies are investing in their own stocks at a record pace…

After buybacks among S&P 500 Index members hit a record in the first quarter and more than a third of the index raised dividend payments, corporations have returned $992 billion to shareholders in the past 12 months. At the current rate, 2018 will mark the first year that corporate America showers investors with more than $1 trillion.

“This record surge is proof positive that the GOP tax law was a scam for the rich,” Schumer said in a statement. “As Democrats and many experts predicted, corporate executives and wealthy shareholders are reaping the benefits of the tax law at a never-before-seen rate, while workers and middle-class families are left largely in the dust.”

These bonanzas for shareholders have been blamed for contributing to a widening wealth gap among Americans as more high-income families invest in stocks than low-income households…

Meanwhile, as revealed earlier this month, the US Government has borrowed $488 billion – a record high for the first quarter – as the Budget deficit balloons, in part to fund the corporate tax cuts:

The U.S.’s need to issue more Treasuries is expected to grow as the fiscal picture deteriorates. The budget deficit widened to $600 billion halfway through the fiscal year, as spending increased at three times the pace of revenue growth in the October-to-March period, according to Treasury figures released earlier this month.

Tax and spending measures approved by Congress and President Donald Trump are expected to push the budget gap to $804 billion in the current fiscal year, from $665 billion in fiscal 2017, and then surpass $1 trillion by 2020, according to the Congressional Budget Office.

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.

Just look at the US and ask yourself whether you believe Australia should follow suit?

Sadly, it appears that Australia’s Senate cross-bench is reportedly still considering whether to pass the Turnbull Government’s company tax cut package. From The Canberra Times:

A new tax on digital giants including Google, Facebook and Uber has won support from crucial Senate crossbenchers, clearing the way for a possible vote within weeks on two Turnbull government flagship economic policies…

Centre Alliance senator Stirling Griff, who along with colleague Rex Patrick holds the final two Senate votes needed to secure the company tax reduction, said the party was “100 per cent behind a digital economy tax proposal”.

“If the digital economy tax makes the government coffers swell more than they do now, that is very much a positive step,” Senator Griff said.

“As long as there are no cuts to core community services, we’d be receptive to a degree of tax relief for everybody. A lot could happen in six weeks; maybe the company and income taxes can be done by July”…

One Nation, which has a history of demanding more tax from multinationals, is also sympathetic to the taxation of digital giants…

This is a ridiculous development if true. Taxing digital giants makes sense in its own right and should not be tied to company tax cuts. One has nothing to do with the other, and cutting company taxes will remain poor policy irrespective.

Don’t roll for a tummy tickle, senators.

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