Thursday, May 05, 2016

Is the true situation "nobody knows"?

Adam Creighton has another one of his peculiar columns up where the headline position doesn't seem all that well supported by the details.  It says in the opening paragraph that Treasury has "hit back" at claims a tax cut for companies will hurt Australia, but the details of the analysis don't sound all that convincing.

For example:

Labelling it a “tax on foreign capital”, the analysis said a company tax cut to 25 per cent would increase employment in the long run by 0.1 per cent, equivalent to about 12,000 jobs, and boost real wages 1.1 per cent.
0.1% is supposed to be impressive??

Creighton then goes on to note one dissenter:
Janine Dixon, a researcher at Victoria University, last month challenged the orthodox view, finding gross domestic product and workers’ wages would rise but not by enough to make up for the transfer of government revenue to foreigners, which could no longer be spent on public services.
“The right indicator of national benefit is the impact of a company tax rate cut on national income and that’s clearly negative,” she said.
Of course, there is the fact that Ken Henry was a supporter of a company tax cut to 25% to make us "more competitive with Asia."   On the other hand, the US doesn't exactly seem crippled by its corporate tax rate, although no doubt there is the argument that big corporations find motivation for their off shore tax shenanigans in the relatively high tax rate.

I reckon the truth is that no body really knows how good an idea it really is.

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