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Bill Shorten ought to consider reworking the old 1980's AIDS slogan: "I like sex, but I'm not prepared to die for it."
The new one would say: "I like growth, but I'm not prepared to kill the budget for it."
Accused by the Coalition of waging a "war on growth" because he is not prepared to spend $8 billion per year to achieve mere fractions of it, he ought to talk frankly about costs and benefits, making the point that just because we can get more of something, it doesn't mean we should, regardless of price.
The $8 billion per year figure comes from Independent Economics, the firm lauded by treasurer Scott Morrison for its work for the treasury on the company tax cut. It finds that when fully in place the cut would cost $11.3 billion per year in today's dollars, partly offset by $3.1 billion in extra personal tax as Australian investors found themselves unable to deduct as much pre-paid company tax under dividend imputation.
By way of comparison, universities cost the budget $9.6 billion per year the Pharmaceutical Benefits Scheme $10.8 billion.
If you were going to spend that much on something, enough to replace a program that was demonstrably worthwhile, you would want to be sure you were getting value for money.
The Independent Economics modelling finds that after several decades the $8 billion per year would lift living standards by between $5 billion and $9 billion. That's not an increase of $5 billion to $9 billion per year, its an eventual increase that would be maintained. As a proportion of gross national income it is somewhere between 0.5 and 0.7 per cent. As an increase per year it is less than 0.1 per cent. Rounded to one decimal place it is 0.0 per cent.
And the boost to jobs would be even smaller. Independent Economics says employment would eventually climb by 0.17 per cent if the tax cut was funded by a tax on households, or by as little as 0.02 if it was funded by cutting government spending. That's an eventual increase of between 2400 and 20,400 jobs. By way of comparison employment has climbed by an average of 24,400 per month each over the past year. It means that after 20 to 30 years the $8 billion per year holds out the prospect of delivering an extra month's worth of employment growth.
It's not many jobs and not much growth. It's true that Shorten has spoken out in favour of company tax cuts in the past, but it is the mark of a good manager to weigh up value for money before transferring the funds.
And the $8 billion would have to come from somewhere. Some would pay for itself as companies expanded, boosting taxable income. But most would have to either come from higher income or household tax, from cuts to other government programs of a similar magnitude, or by blowing out the deficit.
The money wouldn't be free, but because the full cut in company tax wouldn't come into force until 2026-27, the government can behave in the election campaign as if most of it would be. If it acts in accordance with previous practice it will only reveal how it will fund its promises for the next four years. That's easy for company tax. The phased reduction costs less than $1 billion per year to start with. If it rises to Labor's challenge and outlines its funding plans over 10 years, its choices will look harder. If it outlines its plans beyond that, as it should given that the claimed benefits of the company tax cut won't become apparent until a decade or so beyond 2026-27, its choices look diabolical.
By not committing itself to a program that promises (small) benefits in return for an escalating cost, it is Labor that's being the most financially responsible. Even better, the benefits of its own tax measures; tighter controls on negative gearing and tougher capital gains tax rules, build over time.
The further out you go, the better Labor's tax policy is for the budget and the worse the Coalition's. It's like a rerun of 2013 with positions switched. Then Labor promised to spend increasing billions on health and education and superannuation, pushed out into the future so that the big dollars would be spent beyond the four-year estimates. It booby trapped future budgets, creating a hole for its successors. This year the Coalition's done it, despite its talk about responsibility.
If it fails to match Labor and set out its costs and savings over 10 years as well as four, it will confirm the suspicion that the long-term cost of its promises can't withstand scrutiny. If it gets back in and gets the company tax cut through the parliament, it'll be forcing future governments to make hard decisions that it is not prepared to make or spell out itself.
Or maybe not. As soon as the Coalition got in in 2013 it hit the pause button on Labor's unfunded increases in superannuation and axed its planned but unfunded increases in spending on hospitals and schools. A future Labor or Coalition government would be perfectly entitled to treat this government's unfunded promise on company tax the same way.
Peter Martin is economics editor of The Age.
