Emma Alberici, the Coalition and some inconvenient tax cuts data

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Emma Alberici (Screenshot via YouTube)

Times are dangerous for the ABC — at least to those who appreciate fair, independent journalism.

My example is Emma Alberici’s report on corporate tax cuts, which was stating what is well-known across the OECD for years. In addition, taxes are not charity.

In my view, attacks on the ABC for leftwing bias are dubious, when most reports, debates and opinions are fairly matched, some major ABC current affairs programs are often pro-LNP and ABC News is increasingly devoted to murders in the tabloid style. Moreover, former PM Whitlam, for misguided reasons (as it turned out), abandoned the ABC’s TV licence as a source of funding — unlike the BBC. I certainly support the ABC Charter, which is meant to free it from all political party influence, but pressures from funding have not furthered that.

Take the criticisms of Alberici’s report on research about corporate tax cuts. The evidence supports her work overwhelmingly. The reason the Coalition Government objected to Alberici’s work on cuts is that it removed LNP promoters' justifications. The claim about the “jobs and growth” that would ensue from the tax cuts is no longer believable — if it ever was. And in practice, that seemed to be confirmed in the Longman by-election — a far more inconvenient detail for the Coalition than Alberici’s work that gets to some key problems.

But much more can be said about the 40-year efforts of right-wing governments to succour their supporters. The plan was based on the old “Laffer Curve” – a simplistic 1974 doodle that launched trickle-down economics (as Mike Seccombe reminded us in 2016). Tory PM Thatcher created stagnation partly via Laffer’s advice and, ever since, Tories have consistently worsened the social landscape, wherein some UK regions are poorer than even Greece.

Republican President Bush Snr called it "voodoo economics" — not Trump Republicans. Seccombe and Alberici cite the U.S. Congressional Research Service (2012) that found no correlation between taxes of the highest income-earners and economic growth. Alberici also cites Saul Eslake, RBA Governor Lowe, the ABS, the OECD, Statistics Canada, the UK’s ONS and those with counter-evidence or models.

Yet the U.S. Economic Policy Institute research up to September 2018 shows last year’s U.S. tax cuts have not increased investment or improved it through that weirdly-used term "competitiveness", but have flowed to corporate buy-backs and increased rentier dividends. It means the benefits of corporate tax cuts are pocketed, particularly in the absence of conditions like jobs and wage rises attached. President Kennedy did apply investment conditions on his tax cuts, but conditions did not apply from President Reagan onwards.

Wealth and income inequality have risen markedly since the 1970s across the OECD. Pressing on, Arthur Laffer – as though risen from the dead – advised Trump and visited then PM Turnbull who thereupon talked of (long disproven) "laws" of supply and demand.

One can hardly blame Alberici for citing Senator Mathias Cormann (2018), saying that "wages will increase as night follows day", because, he said, the tax cut was "plain logic" and not "economic theory" but "economic practice". No one can dispute that regressive taxes are indeed " practised", but the question is to what effect?

Alberici (21 Feb 2018) having removed "opinion" that is hard to separate from the reams of data across the world dismissing any idea there are benefits, can also hardly be blamed that, after Longman, the corporate tax cuts were "cut". Moreover, Alberici merely suggests it is hard to prove a link with wages. But let’s push her modest suggestion further. It is not only that the LNP has cut penalty rates and dismisses the essential role any union movement plays in civil society.

The LNP might ponder that Stalin and Hitler differently liquidated those countries’ union movements; also, the Fourth Estate vanished (a free press). Another furphy is extolling the tax gains to be made from bracket creep when wages remain flat or, conversely, claiming that bracket creep can be removed via a more regressive income tax system. Most people’s income is not "creeping" into higher brackets.

The problem is also that so many link taxes with paying for government social provisions. The U.S. tax cuts have increased its budget deficit (RBA), but what is the cost to social health, education and security? Using a household budget analogy, high deficit governments are said to be unable to afford social spending. This is not true in accounting terms. Governments spend through issuing the currency and tax later in their own currency (continually). Strictly speaking, taxes are debt repayments to government, whether you prefer a massive spending on defence and policing, and/or on improving the lives of citizens — the electorate. Just like bank-created money, state-created money needs debt-servicing into the future and, for a not unrelated reason, the bond vigilantes prefer that governments spend on defence rather than citizens’ well-being.

This is all to say that taxpaying is no charity, as the well-off assume. If state money becomes inflationary, taxes should increase, but state-spending should balloon in deflation. Even if they choose, the well-off are still in debt to governments that provide decent policing, if not huge war machines. The overall problem with this machismo is that economic activity is far less from military hardware expenditure than from state stimulus designed for decently paid (taxable) jobs and from expenditure that increases effective demand of all consumers, of which the well-off are a small fraction. They and the corporate chiefs can stare at a barren and divided social landscape that the LNP appears to favour, and exploit desperate workers, to the grave, the Financial Services Royal Commission shows. But we live in a democracy. Voters are unlikely to choose oligarchy willingly.

It is possible the now former ABC Chair Justin Milne wanted the tax cuts. Alberici provided an inconvenient report — no laffing matter, I think, to more than Justin Milne.

Dr Jocelyn Pixley is a former full-time academic, now Honorary Professor at Macquarie University. Her latest book, 'Central Banks Banks, Democratic States and Financial Power' has just been released. This article was originally published on 'Pearls and Irritations' and is republished with permission.

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