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Tax cuts and political suicide

By Everald Compton - posted Wednesday, 11 May 2016


I respect Malcolm Turnbull and Scott Morrison. They are intelligent, astute Parliamentarians. This makes it difficult for me to understand why they have made tax cuts the cornerstone of their election campaign.

They appear to believe that such cuts will stimulate economic growth and create jobs, but history proves this theory to be a fallacy.

In order to justify this statement, can I suggest to all my readers that you study research reports into tax cuts in USA and Australia over the past fifty years? You will find no economic or social justification for them.

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The facts are that every tax cut has created some more billionaires, but few jobs down on Struggle Street. The trickle down effect has never ever trickled down and never will. Of even more concern is that on each occasion there has been a tax cut the national debt has risen.

The prime example of this is the dramatic failure of Reaganomics.

As probably the most conservative President in American history, Ronald Reagan won office on a promise of huge tax cuts which he said would create unprecedented prosperity. His opponent, Jimmy Carter, took the opposite view and lost. History proved Carter correct as Reaganomics was a failure and the national debt rose alarmingly.

George W Bush followed Reagan's example and failed also, clearly laying the foundations for the GFC.

Both Reagan and Bush were advised by an economics guru by the name of Laffer, a friend of Donald Rumsfield. It is interesting to note that he recently visited Australia. He still earns a good living pushing his failed theory.

A study of all tax cuts in Australia proved likewise to the American experience as Hawke and Keating found out with their tax cut.

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Now, having expressed my concerns about the futility of tax cuts, I will be a hypocrite if I don't provide an alternative.

What I will now suggest is not new, it has just been neglected.

I reckon that taxes must be increased and the new revenue spent on infrastructure (only), not on welfare handouts.

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This article was first published on Everald Compton.



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About the Author

Everald Compton is Chairman of The Longevity Forum, a not for profit entity which is implementing The Blueprint for an Ageing Australia. He was a Founding Director of National Seniors Australia and served as its Chairman for 25 years. Subsequently , he was Chairman for three years of the Federal Government's Advisory Panel on Positive Ageing.

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