Yes, Scott Morrison, Cut Taxes – But Slash Spending, Too

THE call by Scott Morrison for Australia to cut company taxes — or risk being uncompetitive globally — has merit, but does not go far enough: proper tax reform would include lifting and broadening the GST, raising the income tax threshold, and cutting income tax rates; an agile government would rein in spending, too. Still, Morrison’s position is at least a start. Perhaps there is an ounce of intestinal fortitude within the government after all.

During 2017, readers are going to hear an awful lot from me about a strategy the Abbott and Turnbull governments should have used before last year’s election, but didn’t — racking up double dissolution triggers one after the other, on every area in which they attempt to legislate reforms but are stymied by the Senate — for the near-death experience of the Coalition at the polls, whilst attributable to a range of factors extending well beyond the nature of any legislation passed on its watch, owed as much to political timidity and a totally erroneous approach to parliamentary management as it did to anything else.

But the case made by Treasurer Scott Morrison in The Australian yesterday — that Australia risks being crippled as an internationally uncompetitive outpost of high taxation — has great merit, and perhaps (I emphasise, perhaps) signals that despite the woeful flaws spanning many aspects of the Turnbull government, some elements within it retain at least a scrap of intestinal fortitude, even if what Morrison is actually arguing fails to reach anywhere near far enough.

Morrison’s argument rests on the recent precedent of the United Kingdom, where the government of former PM David Cameron cut the British corporate tax rate to 20% whilst in a worse budgetary position than that currently facing Australia; Cameron’s government also implemented reductions to personal income taxes and increased VAT — Britain’s equivalent of the GST — from 17.5% to 20%, whilst winding back spending across the board, but with a particular emphasis on the UK’s ballooning welfare budget.

The effects of these changes are undeniable; Britain today is the fastest growing economy in Europe and, for a time, was the fastest growing economy in the Western world, outstripping growth in Australia; the fundamental premise that cutting taxes stimulates economic activity, creating jobs and bringing investment that in turn contributes higher revenues to government coffers than the “foregone” tax revenues cost, is a proven model that has worked many times over the past 40 years — and worked in Britain once before, too, during the early years of the Thatcher government, underpinning rapid economic growth in the late 1980s and sparking an unprecedented boom in the early 1990s that continued until the global financial crisis snuffed it out in 2008.

And Britain isn’t the only place this approach has worked, either; during the period of the ascendancy of the mainstream Right across much of the Western world during the 1980s and early 1990s, this emphasis on creating conditions conducive to economic activity and growth underpinned one of the largest expansions in history; it is the rise of the Left in the early 1990s — in the USA, in Canada, in Britain, with the arrival of the Blair government, and across continental Europe — that saw the rise in taxation by stealth and rampant social spending cut the foundations from beneath prudent fiscal management in the West, and for which the developed world arguably is paying the price today.

The Eurotrash economies of Spain, Italy, Greece et al — strangled by socialism and crippled by debts exceeding, in many cases, 100% of GDP — are the end destination of a ruinous dalliance with “modern” left wing dogma. The United States has just ended an eight year experiment with the same failed policies. Here in Australia, the Rudd and Gillard governments set what for years had been regarded internationally as the “miracle economy” on the same destructive path.

Without a drastic change in direction, the basket cases of Europe embody the fate Australia will, in time, suffer itself.

As The Australian notes, Australia boasted the ninth-lowest corporate tax rate among OECD nations 15 years ago, a position that has deteriorated to 22nd today; it also now ranks among the top five highest taxing nations within the same cohort — an unforgivable indictment on both the Rudd-Gillard regime, which saw business and high income earners as its personal piggy bank, and (I hate to say) the Abbott-Turnbull government, which hiked taxes on middle income earners and which has exhibited neither the inclination nor the mettle to engage in root-and-branch tax reform in any serious or meaningful way.

In this vein, the Morrison agenda of a two-tiered corporate taxation regime, with cuts at the lower end and little else, leaves everything to be desired.

The graphic carried in the article from The Oz is telling.

 

GREED ISN’T GOOD…Australia’s high-tax status will rebound on it in coming years, placing living standards, economic growth — and, ironically, tax revenues — in jeopardy. (Source: The Australian)

In other words, Morrison’s pompously labelled “Enterprise Tax Plan” is a fiddle, no more; yet like all of the fiddles undertaken by this government, it runs the real risk of achieving very little of value whilst cruelling the case for wider reform through its impotence.

Back in 2008 — shortly after Morrison’s arrival in Canberra as the member for Cook — a contemporary asked me for my take on the energetic new Coalition MP’s likely trajectory. “I think he’ll be Prime Minister one day,” I replied. My associate was incredulous. “You rate him that highly?” he asked, disbelievingly.

Readers of this column know that between his role in elevating Malcolm Turnbull to the Prime Ministership and his role as a patsy in the so-called tax reform “debate” presided over by Turnbull a year ago, my opinion of Morrison’s value to the Liberal Party has…slipped, to put it most kindly.

He flourished as Immigration minister in the Abbott government — in a portfolio that would have been a slam-dunk for any modestly competent Liberal MP at that time — but floundered in Social Services, in a stiffer test based on winding back the ridiculous Commonwealth outlay on welfare.

As Treasurer, his record has been unimpressive; his “Enterprise Tax Plan” will achieve little (if ever delivered) at a huge cost of political capital: just like Morrison’s fiddle to superannuation, which has outraged huge slabs of the Coalition’s base (this time the self-funded retirees who took little or nothing by way of government assistance). Morrison and his sidekick, the decidedly unimpressive Kelly O’Dwyer, have also fallen into the trap of implementing Bill Shorten’s “multinational tax” which O’Dwyer herself admits will recoup just $100 million per annum — but at the very real risk, as I have opined previously, of provoking multinational companies to take their operations (and the jobs they create) somewhere else.

This government operates in an environment in which a bare majority in the lower house, a very hostile Senate and the risk some of its number are set to leave to set up a rival “conservative party” are compounded by policy torpor and an utter lack of tactical and strategic smarts.

The tax reform “debate” last year proved, beyond any doubt, that the Turnbull government either has no clue whatsoever about meaningful top-to-bottom tax reform, or a complete lack of any political acumen with which to sell it, or both.

Morrison, as Treasurer, is the standard bearer of the government’s efforts in this arena. His career in the longer term hangs in the balance. He can either take a leadership role on proper taxation reform — breaking as many eggs as is required to make the omelette, and making a few enemies along the way by confronting self-interested vested interests — or he can sink like a stone with his piecemeal patchwork fiddles and the rest of the bullshit Turnbull passes off as a “jobs and growth” agenda.

A program that doubles and broadens the GST, cuts the company tax — for all businesses — to 20%, cuts the top rate of income tax to 35% and reduces the tax scales overall, lifts the tax-free threshold to $25,000 for wage and salary earners and provides a modest boost to pensions, should be accompanied by the abolition of as many other taxes and charges as the increased GST revenues enable (with the states enlisted in that endeavour), whilst identifying as widespread a program for spending cuts as possible: including as much Gillard-era social spending as can practicably be slated for abolition.

Labor will push back — as it always does these days, for populist political reasons — but its predictable rhetoric about tax cuts for millionaires, and fatuous statements that cutting taxes on business will fatten corporate profits but produce no additional employment growth, betray a fundamental lack of comprehension of basic economics, and this fact should be rammed home to the Australian public (provided, of course, the government can fix another of its complete failures during its tenure in office: its communications unit).

The enabling legislation should be presented to the Senate a second time in its original form if rejected, and the government should stand firm in the face of amendments contrived by the ALP, Greens and left-leaning Senate crossbenchers that aim to neuter the package (or even render it counter-productive, as Clive Palmer did with the abolition of the mining tax, turning it into a $3.2bn cost to an Abbott government more desperate for a deal than with delivering rigorous policy outcomes).

In other words, Morrison can use tax reform as the Coalition’s first base for building a proper reform agenda: and if the Senate knocks it back, the enabling bills should be converted into double dissolution triggers. More would follow if the same approach is replicated across government. This is the way Turnbull’s government can simultaneously answer the charge it has no agenda with which to govern, whilst stockpiling a solid base of worthwhile policy with which to fight another election if its efforts are thwarted.

An agile, streamlined, efficient system of low and broad taxes, that rewards and encourages enterprise and personal effort and discourages and penalises indolence, is a reform any conservative government could be proud of: and if Morrison is fair dinkum about tax reform, he should forget his half-baked “Enterprise Tax Plan” and have a serious crack at the whole thing.

The Australian notes Morrison is in London to talk to business leaders; he should take the opportunity to sound out Cameron, his Chancellor George Osborne, Minister for Work and Pensions Iain Duncan-Smith, and others who were central to the Cameron-era program that picked Britain up off her knees and set her back on her feet.

In the final analysis, however, Morrison’s remarks offer the flicker of hope that someone in the Coalition’s senior ranks has belatedly got the message that unless the government does what it was elected to do in 2013 — and embarks on sweeping reform in Australia — it is doomed to lose whenever it next faces the public at the ballot box.

Perhaps there is an ounce of intestinal fortitude within the Turnbull government after all; but if Morrison wants to ever be Prime Minister — or even be regarded as a successful Treasurer, and not just another hack occupying that office — this piece in The Australian must merely represent the start of a renewed effort and change of focus, and not just another of the directionless thought bubbles that have already cruelled the Coalition’s political stocks for far too long.

 

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2 thoughts on “Yes, Scott Morrison, Cut Taxes – But Slash Spending, Too

  1. Shorten will always push the ‘big business’ and ‘millionaire’ cuts as this is what the burgeoning and dissatisfied welfare cohort relate to and resent – always affording him a captivated audience of the great unwashed and his ever growing voter base.

  2. Morrison will be taking his orders and getting his ‘ideas’ from Malcolm’s mate, Martin Parkinson; just like Hockey. Its not for nothing that Abbott sacked him and of course Malcolm has brought him back and installed him right in the middle of this pathetic leftist government.

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