In an extended sitting of the Senate last Friday, a partial endorsement of the Coalition’s company tax cut legislation included one-off payments for singles and couples who receive the Age, Disability or Carer pension.
The original legislation, the centrepiece of the Coalition’s May 2016-17 budget, involved $50 billion worth of tax cuts for all Australian companies. But it seemed unlikely the crossbench would endorse such legislation, so protracted negotiations between Senator Mathias Cormann and the three Nick Xenophon senators have produced a compromise – the cuts in company tax will be applied to all companies with turnover up to $50 million.
In exchange, the Xenophon team has extracted promises of a one-off payment to those receiving an Age Pension, Disability Pension or Carer Pension as recompense for sharply rising electricity prices. The payments of $75 for singles and $125 for couples will be announced in the May 9 Federal Budget and are expected to be paid ‘this winter’ according to Senator Xenophon. They are projected to cost the Federal Government around $260 million and at this stage are unfunded.
Other concessions gained by the Xenophon team include funding for a loan for a solar thermal plant in Port Augusta in South Australia and a study into the benefits of a pipeline between South Australia and the Northern Territory.
So, after long hours of wrangling, the Xenophon team have managed to reduce the cost of proposed business tax cuts from almost $50 billion to $24 billion by applying cuts only to companies with turnover up to $50 million. In exchange nearly 3.5 million welfare recipients will get a one-off sugar hit of $75 (or $125 for couples). And some South Australian citizens will get a power plant and a study. Yep, that’s it folks – two state-based concessions, a report and the equivalent of a massage or good night out for pensioners. It’s hardly well thought-out policy by the Xenophon team – just a short term ‘lolly’ for pensioners and evidence that Nick Xenophon is more interested in getting his party re-elected than longer term benefits for the Australian public.
How so? Let’s consider the current rhetoric from the Coalition, in particular the Prime Minister and Treasurer, that we can no longer afford the cost of the Age Pension, that the ‘dependency’ ratio is getting worse and that we desperately need to balance our books. But apparently, the proposed company tax cuts – which would have cost, in full, over a period of ten years, $50 billion – were okay. While access to the Age Pension, according to the Turnbull Government, should be tightened and the expensive and faulty Centrelink robo-debt recovery program is somehow fair.
At best, most economic commentators have agreed that the company tax cuts could only ever deliver a marginal increase in GDP over a very long period. It seems that the Coalition is happy to believe that a tax cut for business will automatically result in increased investment and extra staff being hired, thus benefits for all will flow. Yet credible international research into the ‘trickle down’ theory, whereby incentives to business and the well-off eventually result in benefits for the poor, show this actually does not happen.
Hoping business owners will automatically reinvest this tax cut sounds like Darryl Kerrigan in The Castle – they’re dreaming! And a one-off payment of $75 or $125 will make little difference to those struggling week in, week out on fixed retirement incomes. Sorry Nick, we need to fix the system not push for thought bubble trade-offs. What a wasted opportunity.
What do you think? Are you happy with the Xenophon Party’s negotiation on the company tax cuts or do you think they could have extracted much more from the Government? Will the one-off energy payments make a difference in your life?