Kimberley Kitching (Victoria, Australian Labor Party) Share this | Hansard source

I rise to speak to the motion to take note of answers by Senator Cormann. Every time Senator Cormann gets to his feet on the subject of taxation, he repeats his main talking dot-point, his mantra—namely, that giving massive tax reductions to the wealthiest 10 per cent of the population, as he did last week, and to the banks and other large corporations, as he wants us to agree to do this week, will lead to greater investment, higher employment and higher wages for Australian workers.

But all the evidence we have from Australia and overseas contradicts this. After the Reagan tax cuts, the Bush tax cuts and the Howard tax cuts, the beneficiaries of these cuts did not use these massive windfall gains to hire more workers or pay their employees higher wages as Senator Cormann would have you believe. No, they used the money to pay themselves bigger bonuses and their shareholders bigger dividends. The evidence for this is overwhelming, and I'm sure that Senator Cormann knows that what I am saying is true. Let's look at a recent example of that evidence. Let's look at the Business Council of Australia's survey from just a few short months ago, where only 16 or 17 per cent of Australian CEOs admitted that they would use tax cuts to boost employment. That's less than 20 per cent of them. More than four in five of the CEOs surveyed would use the extra funds to—wait for it—return money to shareholders or increase investment in the corporate entity. They would not boost employment. They would not boost wages. This is the trickle-down economics that the government would have you believe works. It does not.

In every response to every question, not just today but over the last few months, Senator Cormann has gone with his usual response—even after the BCA survey came to light. But let's look at the history, because it is informative. Ronald Reagan became president in 1981, determined to put into practice the new economic doctrine dreamed up by the conservative think-tanks—that if you radically cut tax on corporations and on high-income earners, economic growth will take off, tax revenues will rise and the tax cuts will pay for themselves. Of course, as we know now, nothing of the kind happened. According to a paper from the Brookings Institution, federal revenues fell by nine per cent, the deficit blew out, interest rates rose to 20 per cent and there was a severe recession. In response, congress had to reverse most of the Reagan tax cuts.

By contrast, when Bill Clinton raised taxes on high-income earners in 1993 the economy boomed, creating 23 million new jobs and a record eight years of continuous growth. Then came George Bush, who once again cut corporate taxes and taxes on high-income earners—exactly what this government did last week and what this government would have us do this week. The Heritage Foundation predicted that the Bush tax cuts would produce a golden age of growth and prosperity so that the US could pay off its entire debt by 2010, but what in fact happened? There was weak growth all through the Bush years, culminating in the crash of 2008 and the deepest recession since the 1930s. Bush left the US mired deeper in debt than ever before. After taking office in 2009, President Obama had to again raise taxes to try and get the economy back on track. Now President Trump is again taking the US down the road of massive tax cuts for corporations and upper-income earners—and, of course, the Australian Liberal Party is following its new mentors in the alt-Right.

All the evidence is that this will of course end badly, both overseas and in Australia. It is simply not true that cutting taxes stimulates economic growth or employment, no matter how many times those opposite repeat this article of faith. Research in the US by the non-partisan Congressional Research Service shows no correlation between the top rate of tax and economic growth. All the evidence is that cuts in tax for corporations is used mainly for stock buybacks, to pay executives bigger bonuses and to pay stockholders bigger dividends—as discovered in that startling piece of surveying by the BCA of their members. I have no objection to shareholders getting bigger dividends, but let's be clear: that is a far cry from Senator Cormann's constant assertion that tax cuts are a magic elixir that will lead to more investment in productive industry, more jobs for Australian workers and higher wages. (Time expired)

Question agreed to.