We Know What You’re All About

9 August 2018

Here’s the wrong way to govern: listen to what the wealthy and powerful want, then work backwards to an argument for why it’s good for ordinary people.

Here’s the right way to govern: don’t worry about what the power-brokers want. It’s usually bad for the rest of us. Just listen to what ordinary people need, then deliver.

Australians say they need tax justice to combat growing inequality, not tax cuts for Gina Rinehart. So why cut corporate tax by $35 billion dollars?

Australia’s corporate titans say the cuts will create jobs, and boost wages. Garbage. Just ask businesses what they’ll do with the extra cash. In March, a survey by the Business Council of Australia (BCA) found 80 per cent of CEOs would give the money to shareholders, or increase capital expenditure, instead of increasing wages or hiring staff. This reveals the tax cuts for what they are: a handout to the investor class. Freeing up corporate money doesn’t free it up for workers. We can see this in the behaviour of small businesses who’ve already received a cut—less than 20 per cent hired new people, barely three per cent increased wages, but over 50 per cent banked the cash. Similarly, Bloomberg reported that Trump’s corporate tax cuts in the US saw “huge, immediate gains for wealthy shareholders combined with tepid increases in business investment and decreases in real wages [which doesn’t] paint a flattering picture of the tax cut’s impact so far”. In fact, what actually changes pay and conditions is workers fighting for control of their workplaces.

If we ask who’s paying for these cuts, we see it’s not just workers getting conned. There’s three options for who’ll foot the bill. First, the cuts might pay for themselves by stimulating “a significant and sustained increase in business investment” to increase the tax base, and therefore total revenue. But the BCA survey, the conduct of Australia’s small businesses, and the US example indicate that most of the money will disappear into corporate coffers. Second, the government could slap other, less-well-off groups with taxes to make up the revenue shortfall. But the Parliamentary Budget Office has expressed concern that the cuts are not being matched by removing concessions or adding new taxes, putting “downward pressure on company tax receipts as a share of GDP”. Third, we could cut social spending.

This third outcome would be the most serious. Slashing tax guts the government’s ability to support essential services: Centrelink, health, transport, and education. People rely on these services every day, and would rather keep them than give the yacht-club class a tax holiday. A national poll by the Committee for the Economic Development of Australia (CEDA) this year found that reducing corporate tax was one of the least important issues for Australians. But high-quality public hospitals, aged care, and increasing the pension were Australians’ top priorities.

CEDA observed that corporate tax giveaways are harder to sell when “the community feels removed from the benefits or have lost trust that the benefits from growth will be broadly shared.” The Australian body politic is responding accordingly, trying to vomit back up the tax cuts like the rotten offering they are.

People are locked out of growth, and they’re angry— especially since the banking royal commission exposed corporate Australia’s culture of criminality and lawlessness. The shameless pursuit of tax cuts for the banks despite the commission’s findings recalls Warren Buffett’s famous reflection on class war: “There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.”

It’s not just banks preying on the community. In 2016, we learned that one third of Australia’s biggest companies paid zero tax in the 2014–15 financial year. Among them was US- based energy giant Esso—who sacked 200 workers through their subcontractor UGL last year. In the same year, Esso pulled in $18 billion in revenue. But they haven’t paid a cent of corporate tax since 2013. Why reward them with a tax cut?

Ordinary people have seen wage growth tracking inflation, while watching a record number of companies profit. It enrages workers on a median wage of $53,000 to see the rentier class trying to cram even more of our wealth into their bulging pockets. These are the multinational predators that hid $4.8 billion of Australia’s revenue in offshore tax havens in 2014. Why give them a birthday present? In fact, why bother giving companies tax cuts, if they’re planning to just dodge the tax anyway? These are not responsible social actors or benevolent wealth creators. They are enemies of the community, parasites, hoarding caverns of wealth away from workers, welfare recipients, patients, and students.

Think of what we could do for our community if we turned these vampires upside-down and really shook them. A recent piece by the ABC—itself a well-loved, tax-funded national treasure—explored why high-taxing Scandinavian states top the UN’s World Happiness Scale. It made the connections between high taxes; a large and well-unionised public sector; genuinely liveable welfare benefits; and free high-quality health, transport, and education. Denmark even provides free childcare.

The Scandinavian model should guide how we satisfy human need. Not by slashing tax, then using budgetary constraints as an excuse to cut and privatise aged care, childcare, hospitals, disability support and TAFE. If we take that path, we know the results: malnourished and abused elderly people, and predatory salesmen offering a substandard education.

Students discussing tax and equality should ask who is best placed to fund our public universities: the money-gorged corporates, or us? Modelling by the Parliamentary Budget Office shows that providing students with three years of free tertiary education would cost $27 billion over the next decade. This would free our younger siblings from the HECS debt burden. But it would also require the corporate elite giving back to the community whose resources they drain. We can fund high-quality essential services like free higher education, but not if we lob $35 billion to the corporate jackals.

To resurrect the notion of the public good in Australia, we need to define ordinary people’s interests against the interests of the big polluters, layoff artists, and tax-evaders. Regulatory capture is eroding our capacity to provide for the community. So we have a choice.

We can build a caring society based on mutual aid and solidarity.

Or we can let corporate Australia tighten its chokehold on our community.

It’s up to us.

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