TAX CUTS & POLITICAL SUICIDE

I respect Malcolm Turnbull and Scott Morrison. They are intelligent, astute Parliamentarians. This makes it difficult for me to understand why they have made tax cuts the cornerstone of their election campaign.

They appear to believe that such cuts will stimulate economic growth and create jobs, but history proves this theory to be a fallacy.

In order to justify this statement, can I suggest to all my readers that you study research reports into tax cuts in USA and Australia over the past fifty years? You will find no economic or social justification for them.

The facts are that every tax cut has created some more billionaires, but few jobs down on Struggle Street. The trickle down effect has never ever trickled down and never will. Of even more concern is that on each occasion there has been a tax cut the national debt has risen.

The prime example of this is the dramatic failure of Reaganomics.

As probably the most conservative President in American history, Ronald Reagan won office on a promise of huge tax cuts which he said would create unprecedented prosperity. His opponent, Jimmy Carter, took the opposite view and lost. History proved Carter correct as Reaganomics was a failure and the national debt rose alarmingly.

George W Bush followed Reagan’s example and failed also, clearly laying the foundations for the GFC.

Both Reagan and Bush were advised by an economics guru by the name of Laffer, a friend of Donald Rumsfield. It is interesting to note that he recently visited Australia. He still earns a good living pushing his failed theory.

A study of all tax cuts in Australia proved likewise to the American experience as Hawke and Keating found out with their tax cut.

Now, having expressed my concerns about the futility of tax cuts, I will be a hypocrite if I don’t provide an alternative.

What I will now suggest is not new, it has just been neglected.

I reckon that taxes must be increased and the new revenue spent on infrastructure (only), not on welfare handouts.

Infrastructure creates jobs three times. Once during construction, more during its operations and even more as new industries are created around it.

Much more compelling is the fact that most infrastructure in Australia is second rate and underprovided, the result of generations of inadequate investment. Its time to reverse this unjustifiable neglect.

But, returning to tax cuts, who pays the price of those cuts. The answer at the moment is those with large amounts of capital in their super funds.

Now, I strongly agree with Morrisons decision to tax those with more Superannuation than they need. It is fair because compulsory Superannuation was never meant to provide anyone with a tax haven.

But this rightness of this decision was negated by the anger of those hit by it. They feel that they are paying for others to get tax cuts.

Had the revenue from new Superannuation taxes been invested exclusively in infrastructure, the decision would have been accepted by voters without much angst.

However, there is another issue that is even more difficult to understand and this is the Prime Minister’s decision not to reform negative gearing. He probably made the decision because it too is the equivalent of a tax cut, but it is an unjustifiable benefit for a privileged few who abuse it mightily.

He seems to have missed the fact that most Australians are willing to accept a drop in house prices as it will enable their children and grandchildren to afford to buy a home. And the under thirties cheer this view.

Now, let me even the ledger.

I have not yet seen a clear plan for economic growth and jobs from Bill Shorten ( whose intelligence and integrity I also respect). He says that he will achieve this through a better educated work force and the advancement of science and skills. While this strategy is excellent and essential, we need a plan as to how it will actually be implemented and we need it soon.

What all sides of seem to forget is that the average voter is now much more astute, informed and politically aware than when I first voted sixty years ago. They quickly identify spin and are disgusted by it.

Right now, they can’t work out why, after 25 consecutive years of prosperity, business in Australia needs a tax cut. It lacks the logic that will win any votes.

Politicians need to pay them greater respect – and quickly – as the Trump vote is growing rapidly in Australia and the pending backlash is enormous.

Yours at large,

Everald Compton

If you would like to buy my book on nation building – “The Man on the Twenty Dollar Notes”, please click here.

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4 Responses to TAX CUTS & POLITICAL SUICIDE

  1. Peter Boge says:

    Peter J Boge

    3 Webster Court

    PETRIE Q 4502

    Fri 15 July 2016

    Hi, Everald

    I enjoy reading your posts which come about weekly.

    Many people I know say that Australia does not have the population to find Inland Rail or High Speed Rail.

    I deplore their approach to ‘risk taking’ or thinking ‘outside the square’ to solve Australia’s problems with providing efficient transport, communications and populating the vast inland.

    I wish someone would get it through politicians’ heads that we want your ‘pet project’ – Inland Rail — now.

    So I was surprised to see on TV last night that a consortium has come up with funding for a High Speed Rail project lining Melbourne, Canberra and Sydney, along with the creation of several inland cities.

    ‘Rail Express’ emails me stories nearly every day, and this project featured in greater detail in the articles received today.

    Far from detracting from your initiative – Inland Rail – I believe this will give your project greater exposure and impetus.

    Governments will never find it cheaper than at present to borrow money for nation- building projects, and of course last night’s announcement shows that there are groups out there with the funds to bankroll these projects.

    I wish you well with Inland Rail, and I hope there is an update on progress soon.

    Kind regards.

    Peter

  2. Gabrielle Drinkwater says:

    Everald..WHY do you seem to be the ONLY VOICE of Commonsense heard today?? Even Malcolm who SPEAKS WELL, lacks Clarification of his THINKING when trying to sell His Reasons.

  3. Nigel D'Souza says:

    I could not agree with you more Everald. Well said!! I am mystified as to how this fallacy that cuts will grow the economy has “taken roots” within our society. As you very correctly pointed out, the experience with Reaganomics and the George Bush tax cuts (in the midst of 2 wars the US was engaged in), shows clearly this policy does not work. Its disappointing that economists and academics who have studied these tax cuts (studies you refer to) do not come out and clearly tell our society what happens after tax cuts. (I believe the experience in Britain is the same). Hopefully economists and academics are seen as apolitical professionals and will be believed more than a politician. But I don’t see any professionals in this field standing up and making this point. Sadly, the “vested interests” in this country are so great that they hide in corners ………………
    Regards,
    Nigel

  4. Heather Milton says:

    As usual soooo well said Everald. I whole heartedly agree more tax but only to create/pay for infrastructure. That way there will be more ordinary people with jobs and a share of the pie, not just those doing well. I’d like to know which infrastructure you would suggest to start. The VFTrain Q’ld to Vic ? I have always liked the idea you speak of in Daming the northern Gilbert Rivers et al sending water inland to the Koorung. Both would give jobs to our own (get rid of 457’s) and those seeking refuge here as English not initially required – learn many skills/language on the job.

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