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politicsCutting company tax won't drive investment: Australia Institute (smh.com.au)

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[–]twigboy 28 points29 points  (2 children)

Facts won't persuade Liberals - everyone

[–]steveurkelsextape 7 points8 points  (1 child)

Facts won't persuade voters - Liberals

[–]col381 0 points1 point  (0 children)

Sadly, that's a fact

[–]Agitator1234 56 points57 points  (3 children)

Will drive investment IN LNP. (I hear you get a pretty good return on your investment.)

[–]-lumpinator-c***inator 32 points33 points  (2 children)

Donate $20,000, get a few million dollar contract from the government.

[–]madbrotha 0 points1 point  (1 child)

Don't forget the cushy jobs after retirement

[–]-lumpinator-c***inator 0 points1 point  (0 children)

Who can forget such cushy things

[–]PM_ME_STUFF_N_THINGS 34 points35 points  (0 children)

All hail trickle up economics!

[–]Kangalooney 7 points8 points  (2 children)

It's the whole $6000 toaster thing.

At first glance it looks good. The toaster lets the cafe make more toast at a cheaper cost letting them sell more toast.

But the economic model behind this type of thinking misses the real question; who is going to buy all that extra toast?

  • Mom and dad aren't going to be able to afford it. Not with the ever increasing costs of sending junior to school.

  • Bruce and Sheila the newly weds aren't going to afford the extra toast. The are too busy scrimping and saving to buy a small shoebox to live in.

  • Single Jim certainly isn't going to afford buy it. While his income might be high enough his 50 hour week and four hour daily commute to his affordable unit means he just doesn't have the time.

  • Jane the student certainly isn't going to afford the extra toast. Between her course fees and struggling with rent she certainly doesn't have anything left over. Even if she did go out and regularly buy that extra toast the new Centrelink would likely decide that, because she can afford the extra toast, her Austudy payments are too high.

  • Joe the toaster, the guy whose job was replaced by the toaster, sure isn't going to afford the extra toast.

Same goes with company tax cuts. It looks good on paper but it still misses the big question: who is going to buy the extra services the new investment is supposed to create?

With no new customers the tax cut just goes into the pockets of the business owners. No new jobs. There is no need to hire on extra workers because there is no increase in customers.

In the end, business tax cuts aren't what is needed for the economy right now. Right now we need incentive that increases demand.

[–]Azzanine 2 points3 points  (0 children)

Actually it would be doable but only if you forgo the smashed avo...

[–]teledyne 14 points15 points  (0 children)

Businessman who happens to be P.M. wants to cut company tax rates.

Can the corruption get any more obvious?

[–]Phroneo 4 points5 points  (0 children)

That isn't what it was for. They should study the real purpose. How much it will benefit sponsors. Particularly the CEO's and shareholders.

[–]eatsleepborrow 4 points5 points  (1 child)

It did not save the European economies several which have lower corporate tax rates than ours. The companies still shifted to China!

Donald Trump is going to learn the same lesson in Tax Stupidity very shortly. Him thinking that cutting taxes is going to magically bring back companies from China and Mexico is A grade stupidity that only serves wealthy special interest groups.

[–]thedugong 1 point2 points  (0 children)

Donald Trump is ... wealthy special interest group

[–]DRUNKEN_ELVIS 5 points6 points  (0 children)

For big business to keep the profits in the multi billions per quarter any company tax rate reduction in Australia would go straight into the bottom line.

[–]jimmythemini 7 points8 points  (1 child)

Next up on smh: Bear shits in woods

[–]mooblah_ 0 points1 point  (0 children)

Lakes either do or don't have water in them.

Am I playing this correctly?

[–]frawks24 14 points15 points  (12 children)

While I am in agreement with this finding, it should be noted that The Australia Institute is essentially the left wing version of the IPA, you won't find anything by them that goes against the norms of left-wing politics.

I'm not necessarily saying you should dismiss everything they say but they are certainly a rather biased organisation.

[–]horselover_fat 9 points10 points  (6 children)

They are far from the left wing version of the IPA.

The IPA is as fast right (economically) you can go. TAI is centre-left.

The left wing version of the IPA would be a think tank pushing Marxism-Leninism.

[–]frawks24 1 point2 points  (5 children)

Semantics, TAI has a heavy bias that alligns with somewhere between the greens and the ALP. They should not be taken as a source on their own because they don't publish studies that go against their preconceived notions.

[–]horselover_fat 2 points3 points  (0 children)

They should not be taken as a source on their own because they don't publish studies that go against their preconceived notions.

You can say that about any economics research.

[–]thedugong 3 points4 points  (3 children)

alligns with somewhere between the greens and the ALP

Center-left?

[–]frawks24 -1 points0 points  (2 children)

the ALP are center left, the greens are further left than that, so I would call the TAI somewhere further than center left but not far left.

This is irrelevant anyway because the point was about bias, you would be skeptical of a study from the IPA regarding the positive effects of reducing corporate tax, similarly you should be skeptical of a report from TAI detailing the negatives of reducing corporate tax.

[–]mooblah_ 4 points5 points  (1 child)

And yet while you're genuinely suggesting we don't dismiss everything they say .. the sentiment expressed by defining their left-wing bias is one which would typically suggest we should dismiss everything they say.

Bias is a cruel mistress.

[–]frawks24 2 points3 points  (0 children)

I'm asking that we think critically about whatever comes out of the organisation as they have e a rather clear bias. I myself am left leaning, that doesn't mean I shouldn't call out bias from the left

[–]PinguPingu 10 points11 points  (7 children)

Wait, this study only looks at FDI through the FIRB. This is an incredibly narrow scope for a 'study'. How on earth can they come to such a conclusion just because most of our FDI via is done by the US? Who also happens to be the largest economy in the world. And they are only looking at FIRB cases??

Funnily, the Tax Review comissioned by Rudd has a completely different finding:

Australia should respond to these developments by reducing the company income tax rate to 25 per cent over the short to medium term, as fiscal and economic circumstances permit. This would ensure that Australia remains an attractive place to invest — not only in the resources sector but also in the non-resource sectors of the economy.

https://taxreview.treasury.gov.au/content/FinalReport.aspx?doc=html/publications/papers/Final_Report_Part_1/chapter_5.htm

The Australia Institute is the country's most influential progressive think tank.

Oh, foiund the reason for the conclusion.

[–]redditismyslave 2 points3 points  (0 children)

as fiscal and economic circumstances permit.

Well there's the problem.

[–]BennyCemoli 2 points3 points  (5 children)

Treasury is politicised, and highly unreliable, but even their models show after-tax wage growth in the long run (10 years) of less than 0.3 per cent. In the mean time, other taxes would be needed to replace the lower corporate tax rate. In other words, the best outcome for workers is that for the next decade they give their money to the gov't to give to corporations in the hope nobody'll change the rules in the mean time and take that minute pay rise back off them.

Meanwhile, channeling the same amount of money into education and training would generate an order of magnitude more growth sooner.

And that's putting the best case for corp tax cuts forward. Verifiable reality suggests that's wildly optimistic.

“The reduction in top tax rates appears to be uncorrelated with saving, investment, and productivity growth. The top tax rates appear to have little or no relation to the size of the economic pie. However the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution. The report notes that tax rates were at the highest when growth was at its peak, and that the reduction in tax rates has not had any discernible impact on the types of investment that lead to growth.”

Conclusion of a study of tax rates since 1945 by the US Congressional Research Service, a nonpartisan entity associated with the Library of Congress that does academic quality research to answer difficult policy questions.

https://fas.org/sgp/crs/misc/R42729.pdf

[–]PinguPingu 1 point2 points  (4 children)

in other words, the best outcome for workers is that for the next decade they give their money to the gov't to give to corporations in the hope nobody'll change the rules in the mean time and take that minute pay rise back off them.

That , that is not what happens. The modelling shows a drop in the corporate tax rate can in fact raise wages because of even that small increase in total investment.

That U.S. study looks at the top tax rates, i.e income tax rates.

Meanwhile, channeling the same amount of money into education and training would generate an order of magnitude more growth sooner.

This is the most accurate counter-point. Can the potential loss of revenue be better utilised in education and training? The question is how far can you go with funding and still get good results. There could be diminishing returns.

[–]BennyCemoli 0 points1 point  (3 children)

The modelling can suggest whatever it wants to. Reality disagrees.

A study of corporate tax rates from 1948 to 2010 by the same author found that:

The top statutory corporate tax rate has been falling since the early 1950s. The top corporate tax rate was 52 percent throughout the Eisenhower administration—17 percentage points higher than the current top rate of 35 percent. U.S. GDP grew by almost 4 percent annually in the 1950s compared with a 1.8 percent growth rate in the 2000s. On the surface, it would appear that more robust economic growth is associated with higher corporate tax rates. Further analysis, however, finds no evidence that either the statutory top corporate tax rate or the effective marginal tax rate on capital income is correlated with real GDP growth.

http://www.epi.org/publication/ib364-corporate-tax-rates-and-economic-growth/

Can you please stop evangelising these tax cuts? All they do is increase inequality.

[–]PinguPingu 0 points1 point  (2 children)

The Scandi countries are the most equal in the world and have some of the lowest corporate tax cuts. Weird.

[–]Jcit878 1 point2 points  (1 child)

ah damn where was this article the other day when someone wanted a source for this exact claim?

[–]frawks24 0 points1 point  (0 children)

TAI shouldn't really be used as a primary source

[–]qemist 0 points1 point  (0 children)

Their argument -- almost all of Australia's foreign investment applications already come from countries with much lower tax rates -- is childish.

[–]Azzanine 0 points1 point  (0 children)

Well of course, they will pocket the savings.

They wont invest because they see no need.

I mean if you work for a company that want to grow and has space to grow they will spend most of their net gains if they see opportunities for rapid growth.

Problem isn't tax, at least not mainly, it's that the worlds a little unstable ATM.

Also what companies aren't investing? Do we know it's tax related?

[–]RestoringSomeBalance 0 points1 point  (0 children)

Australia should become a tax haven.