Workers in America are set to enjoy massive Christmas bonuses thanks to Donald Trump cutting the business tax rate. In one of the biggest tax cuts in history, the business rate in the US is set to drop from 35 to 21 per cent.
AT & T, the world’s largest telecommunications company, will give each of its 200,000 US workforce a $1000 bonus. This flies in the face of opponents of lower taxes who claim cutting businesses’ taxes only benefits their bottom line. This is wrong.
Businesses are nothing more than an aggregation of the workers, consumers and shareholders they are made up of. When taxes are cut it is these groups who benefit the most.
Lower taxes lead to higher business investment. This flows through to workers as higher wages, consumers as lower prices, and shareholders as higher returns.
Organisations ranging from Treasury to the International Monetary Fund and World Bank have provided analysis supporting this argument.
Yet taxes remain stubbornly high in Australia where the corporate tax rates are 30 per cent for large businesses and 27.5 per cent for smaller ones. This compares with 19 per cent in Britain and 17 per cent in Singapore.
The Turnbull government has proposed cutting Australia’s high corporate tax for all businesses to 25 per cent by the middle of next decade.
While modest, it is the minimum reduction needed to ensure Australia’s international competitiveness does not deteriorate even further.
Recent analysis by Treasury found the proposed tax cut would permanently increase Gross Domestic Product (GDP) by 1 per cent — equating to billions of dollars over time.
Yet despite all of the economic benefits, the Senate refuses to pass the government’s proposed tax cuts.
A key reason for this is the massive misinformation campaign that is currently being run against lower taxes.
Many on the Left want to suck every last dollar out of businesses through higher taxes. They claim that the only way we can judge the value of a business is by how much tax it pays. This argument is ridiculous. Businesses create jobs, pay wages, and provide us with products and services we love and need.
Even worse, the Left misleadingly claim that a business tax cut is the equivalent to a hand-out.
On a recent segment on ABC News, correspondent Emma Alberici said cutting the business tax meant the government would be “giving” businesses more money.
This is astonishing. It presupposes that the government owns the pre-tax income of Australian workers and businesses. If this were true, then we would be in servitude.
This sort of misinformation is not just wrong. It is dangerous. Business investment in Australia as a percentage of GDP is now lower than it was during the economically hostile Whitlam years.
Real wages are going backwards in the private sector. In addition, labour productivity is far below trend.
The least the Australian Senate can do for Australian workers is pass the government’s modest tax cuts first thing next year to start the long road back to economic recovery.