In May and June the Coalition once again attempted to win support for their planned company tax cuts in parliament. They want the company tax rate to be cut to 25% for all businesses from the 2026-27 financial year. This represents a transfer of wealth from the public to private profits, with no guarantee that any extra profit will be invested into wages or jobs.
The full package of cuts has been repeatedly deferred as they struggled to get the numbers to pass it. Labor, the Greens, and some cross-benchers refused to support the plan, as there is widespread scepticism in society over corporate handouts. However, we can’t rely on these people to protect us from these cuts indefinitely.
Bill Shorten is on record agreeing with company tax cuts. Labor is a big business party, and they have made larger cuts to company taxes in the past. They fully agree with capitalism, take donations from big business, and move in the circles of the rich and powerful. They are only blocking the bill for the sake of image.
A number of cross-benchers let the first stage of the cuts pass early last year. This first stage is a gradual lowering of the tax rate for businesses earning under $10 million in the last financial year, $25 million in the current one, and $50 million from next year onward.
Pauline Hanson has changed her position on the larger company cuts multiple times. In late May one of her own senators defied One Nation policy to support the Coalition’s plan. These people are not a serious challenge to the big business agenda.
Derryn Hinch, another obstacle to the Coalition’s plan, at time of writing has indicated that he may make a deal on the cuts as long as companies turning over more than $500 million a year are excluded. This shows that he has never held a principled opposition to cutting taxes on profits – he is only responding to the resentment that exists towards the biggest exploiters.
A mixture of opportunism from cross-benchers and dissatisfaction from ordinary people has so far stopped parliament from passing the full package of tax cuts. Neither Labor nor most cross-benchers actually oppose the cuts in principle. If they are passed, the money lost will be taken out of the hands of ordinary people through spending cuts to essential services such as healthcare, welfare and education.
Company profits are the unpaid wages of working people. Taxing those profits provides some small-scale redress, as the money from these taxes can be returned to ordinary people by funding essential services. Cutting company taxes means taking that money away again and transferring it into the hands of capitalists.
Capitalist commentators claim that lowering company taxes makes businesses more likely to hire more people, boosting employment and in turn consumer spending, creating more jobs. Historically this “trickle-down” approach does not work.
Capitalist investors are prone to simply pocket the extra gains. The Australian Financial Review reported in March on a secret Business Council of Australia survey that found 80% of business owners would use the tax cuts to pay out dividends to shareholders or invest in the company, rather than offering more jobs or higher wages.
The failure of capitalists to invest in employment is why the Coalition has been driven to spend $75 billion on an infrastructure package to try and stimulate construction jobs. Even if a portion of the gains from tax cuts do go towards investment in jobs, there is no way to ensure that the jobs created are decent, well-paid, secure positions.
Instead of putting this money into the hands of unaccountable capitalist investors, where we have no control over what they will actually do with it, socialists argue that it should be controlled by working people. Then we could democratically decide where to invest the wealth.
A socialist government would go beyond raising taxes on profits, and take control of the largest companies, to remove them entirely from the hands of private capitalist owners. This would give ordinary people far greater control over how the economy is structured and where investment is made. Instead of wasting money on profits, this wealth, which is created entirely by working people in the first place, would be under the control of the community.
Editorial comment from the July-August issue of The Socialist