Corporate Tax Cuts Are About Something Bigger Than ‘Jobs And Growth’

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A stripped-down state is not able to fight climate change or unemployment. That’s why Turnbull’s tax cuts are more devastating than they first appear, writes Colin Long.

While the nation has debated whether Malcolm Turnbull’s business tax cuts will drive the “jobs and growth” this government is promising, the broader trend it feeds into – privatising the delivery of essential services – has largely been overlooked.

On one hand, analysis from the Grattan Institute has shown that the tax cuts would have a very small benefit to national income over a long period, and this has been reported as if it calls into question much of the justification for the cuts. On the other hand, the government presents Treasury modelling of a more meaningful effect on national income in order to justify its ten-year economic plan.

The problem with all of this modelling – supportive or otherwise – is that it misses the fundamental purpose of the Coalition’s tax cut plans. The real impact of the cuts is not to drive “jobs and growth”, but to structurally undermine government revenue.

They change the way government operates, and ultimately the way services are provided to the Australian community. The business tax cuts proposed by the Coalition are merely the latest in a long line that started with the Howard government, and were continued by the Labor Party under Kevin Rudd.

There is a widespread school of thought in Australia that we have entered a period of “post-ideological” politics, where the political discourse and elections are dominated by personalities, trivia, and meaningless slogans.

The small differences between the two major parties are held up as evidence of this post-ideological state of affairs. The very interchangeability of the ALP and the Coalition as parties of government reinforces the idea that there aren’t great variations in vision on offer.

Similarly, the emphasis on concepts like “trust” in a party as economic manager and “honesty” reflect a view of government as an exercise in the technocratic “management” of a fundamentally unchanging system.

The vitriolic attack on the Greens by both the big parties and the guardians of the status quo in mainstream media is confirmation of the essential ideological unity of the political elite – those who have a deep interest in things staying as they are. The presence of a force that threatens this status quo quickly galvanises its defenders.

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But we should not think that just because the two major political parties share an essential ideology that this makes for a post-ideological political system. It just means that the ideology has become hegemonic.

In such circumstances, it is even more important to expose the profoundly ideological nature of Australian politics, and the ideology that drives policies such as cuts to corporate taxation.

The rhetoric of “jobs and growth” is so successful because it has been part of the long-term political rhetoric of the Australian settlement. For the first seventy-or-so years after Federation, this commitment to “jobs and growth” was based on export-oriented primary industries (initially agricultural products, then augmented by mining), and import-substituting manufacturing. The state was not afraid to impose tariffs, run businesses itself, operate marketing boards, and ensure workers shared in some of the benefits through the conciliation and arbitration system, awards and centralised wage fixing.

In this period, when a government said that it wanted to promote something like “jobs and growth”, it more than likely meant that it intended to intervene itself to ensure that jobs were created in big infrastructure projects like the Snowy River Scheme, or that tariffs and purchasing plans were going to ensure that BHP would make steel in Newcastle.

The idea that business tax cuts would be almost the only policy that a government would implement to promote “jobs and growth” is a new concept. The reality that the proposed tax cuts will have very little economic benefit, and only over a long time (incomes might rise by up to 0.6 per cent in 25 years time) misses the point.

These tax cuts are not about “jobs and growth”. They’re about permanently undermining the state’s capacity to act as a provider of services, including health and education, in order to ensure that those services are given over to the private sector and offered through the market.

But as a result the tax cuts are likely to reduce jobs and growth. The stagnation of underlying private demand that has characterised developed world economies like Australia’s since the GFC will be exacerbated by reduced government spending.

The irony is that the Treasurer knows there has been a collapse in underlying private demand, except for that which is stimulated by rising property prices. For this reason, the Treasurer’s defence of negative gearing has been revealing.

His contention that real estate price growth underpins the Australian economy is the closest – even if inadvertent – acknowledgement that Australia’s is now essentially a Ponzi economy.

This is why the government is determined, no matter what the social or broader economic cost, to ensure the continued rise in property prices, and why it is determined to resist reform of negative gearing.

The truly destructive aspect of the Coalition’s attempt to undermine the fiscal capacity of the state to act is that when we need a well-functioning and capable government apparatus to manage the great challenges that confront us, it will not be there.

As we’re increasingly confronted by crises like the looming technology-induced jobs and unemployment crisis and climate change, we’re left only with the neoliberal state. Its functions are limited to the enforcement of contracts and establishment and maintenance of markets – backed by repressive instruments like surveillance and incarceration, which are not subjected to any austerity.

It is possible for private markets to supply services such as health care, schooling, and public transport, even if they do so in often inefficient and unfair ways, based as they are on the ability to pay rather than on need.

But when the market incentive is to reduce labour costs, and to deploy at a huge scale labour-saving technologies, then we cannot leave it up to markets to solve unemployment problems. Similarly, we know already that markets will not solve the climate crisis. If they could, surely they would have by now.

If markets were forced to internalise the full and true costs of fossil fuel use and environmental “externalities”, then they would cease to be recognisable as markets.

Climate change will require a fiscally robust state to rapidly lead the shift to renewable energy and help transition workers out of old-economy industries. The coming whirlwind of technologically-driven employment disruption will require policies such as Universal Basic Incomes and huge investment in education and training.

None of these can be provided by a state that has been stripped of its capacity to act. None of them will be provided by the market.

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Colin Long

Colin Long is the Victorian Division Secretary of the National Tertiary Education Union.

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