Shovelling more money to the wealthy

The Fair Work Commission decided in March 2017 to decrease Sunday penalty rates in the hospitality, fast food, retail and pharmacy industries to be the same as those for Saturday1. The Fair Work Commission argued that a gradual reduction (5% per annum) in penalty rates would result in more trading hours, an expansion in the level of services offered and an increase in overall hours worked2. However, University of Wollongong research concluded that up to 15% of all retail workers who were employed on Sundays worked 9% fewer hours between June and July, while hospitality workers experienced no change in their hours. This could be due to an increase in the number of employees choosing not to work on Sundays because of the decrease in wages2,3. As I have stated before, there is never any indication that a decrease in the massive salaries of corporate CEOs are being considered as a way to increase employment or hours worked. Of course not, as it is only the lowly paid who are ever to foot the bill1.

As a continuation of the shovelling of money to the wealthy, the government now wants to continue its tax cuts to all corporations. Treasurer Scott Morrison maintains that it will drive job creation and growth, as the government has done all along, with the support of the Business Council of Australia, who also maintain that a tax reduction would deliver jobs, investment and economic growth4. However, these assertions have no solid empirical or theoretical backing; this backing is only characterised by a lack of consensus5. There are characteristics peculiar to Australia, such as our tax imputation system, which was originally designed to prevent double taxation. It almost goes without saying that Howard and Costello corrupted this system to shovel more money to the wealthy6.

As most people will have realised, the Mango Mussolini has initiated a massive cut in corporate taxes in the United States (from 35% to 21%). However, as in Australia, there are numerous loopholes which allow companies to significantly reduce their tax bill. A recent analysis has found that the average US company listed on the S&P 500 index had an effective tax rate of just 19.3%7. So, did the massive tax cuts lead to an increase in jobs or wages? Although being passed late last year, there is still little indication that it has been passed onto workers as wage rises8,9. Did the tax cuts lead to an increased number of jobs? It is doubtful5,10. Indeed, previous US tax cuts cannot be shown to have led to increased job numbers, as those were accompanied by an extraordinary decrease in interest rates from 6% to 1%11,12.

In Australia’s response to the Global Financial Crisis, there was a large stimulus package, which initially included cash grants to low income families and pensioners, followed by a further grant to all families. This saw household consumption contribute very strongly to growth. In addition, while private investment fell in 2009, public investment through stimulus measures largely took its place, until private investment started to grow again13,14. While most nations in the northern hemisphere went into recession during the GFC, Australia’s stimulus package prevented it from doing so15. That was largely driven by the government investment in infrastructure and increased household consumption which itself was almost solely driven by the grants to consumers. This demonstrates that giving low- and middle-income earners the cash they need will stimulate consumption, as they tend to spend most of what they get. If you give money to the ultrarich, they tend to salt it away, like Turnbull, whose wealth has been salted away in the Caymans. It is no accident that stagnant wages over the last few years has had an impact on consumption, with retail activity being patchy at best16. While the nation cannot afford to hand out cash as it did during the GFC, now that the current government has driven up net government debt to record levels17, employers can afford to pay people a decent wage, and penalty rates. Giving money to the big end of town by way of tax cuts and maintaining it will stimulate wage and job growth is simply a fraud; it is criminal behaviour. The government knows it is a fraud and is based on economic ‘theory’ which is at least 25 years past its use-by date. It has been shown to have been an abject failure, and to simply increase inequality. However, the government is fine with this, because they are not really interested in low- or middle-income earners, they are solely interested in the big end of town, because they wish to garner donations, and low- and middle-income earners do not donate to the Liberal Party.

Sources

  1. http://www.blotreport.com/australian-politics/screw-the-lowly-paid/
  2. https://www.smh.com.au/politics/federal/penalty-rate-cut-fails-to-stimulate-jobs-survey-shows-20171214-h04csj.html
  3. https://www.smh.com.au/business/workplace/penalty-rate-cuts-have-so-far-not-created-extra-full-time-retail-jobs-20180629-p4zojo.html
  4. https://www.sbs.com.au/news/company-tax-cut-is-govt-mission-morrison
  5. https://theconversation.com/there-isnt-solid-research-or-theory-to-support-cutting-corporate-taxes-to-boost-wages-92031
  6. http://www.blotreport.com/australian-politics/lying-about-imputation/
  7. https://www.bbc.com/news/world-43790895
  8. https://www.bloomberg.com/view/articles/2018-05-04/trump-s-tax-cuts-still-don-t-seem-to-be-helping-u-s-workers
  9. http://fortune.com/2018/01/11/walmart-minimum-starting-wages-raises-bonuses/
  10. http://thehill.com/opinion/finance/372015-the-jobs-market-looks-good-under-trump-but-tax-cuts-are-not-why
  11. https://www.americanprogress.org/issues/economy/news/2017/11/06/442297/corporate-tax-cuts-dont-create-jobs-just-ask-carrier-workers/
  12. https://www.thebalance.com/do-tax-cuts-create-jobs-3306325
  13. http://www.blotreport.com/australian-politics/gfc-solution-liberals-hated/
  14. https://www.theguardian.com/business/grogonomics/2016/jun/30/labors-stimulus-package-got-us-through-a-crisis-turnbull-saying-otherwise-is-silly
  15. https://en.wikipedia.org/wiki/Great_Recession
  16. http://www.blotreport.com/australian-politics/retail-becalmed/
  17. https://tradingeconomics.com/australia/government-debt-to-gdp

 

2 Comments

  • Jon says:

    Where’s Shorten ? Any half decent Opposition Leader would be ramming home Labor’s advantage in these areas and making sure the public doesn’t forget the numerous attacks on workers by the Turnbull government. My guess is his minders are keeping him out of public view because they don’t want his limitations further exposed. If that’s the case then they should have a nominated attack dog who has nous and backbone. Keating and Hawk would be tearing the government to shreds.

    • admin says:

      Jon,
      From my reading of recent events, Shorten is busy doing numerous town hall engagements in and around where the by-elections are. Boots on the ground rather than flogging a dead horse trying to get honest coverage in the Murdoch or Fairfax press. I agree Keating and Hawke would be merciless, but the corruption of the media in Australia is a huge obstacle to overcome.

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