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Would a business tax cut encourage you to pay employees more?

Mark Fletcher
February 13th, 2018 · 16 Comments

The Treasurer was on TV last night saying that passing a tax cut for businesses, including small businesses, would see the businesses increase wages. Maybe I am missing something for I don’t see the two as connected in this way. Wages are a pre tax cost of business.

If the government succeeds in reducing tax paid by business do you expect wages to increase?


Category: Newsagency management

16 responses so far ↓

  • 1 Mark C // Feb 13, 2018 at 2:09 PM

    The trickle down theory always sounds great in exactly that; theory, but it does not work. It’s pissing in the wind.


  • 2 Jeff // Feb 13, 2018 at 4:03 PM

    No. Bogus economics.


  • 3 Colin // Feb 13, 2018 at 6:31 PM

    No connection. Zero increase.

    Different answer for large corporations looking for scope to increase EXECUTIVE pay


  • 4 Lance // Feb 13, 2018 at 8:00 PM

    Similar situation to the Commander In Lies over in the US.
    Simply brown nosing to the worker for votes.
    !! No, surely not !!

    Tax cuts will not necessarily mean higher wages for those workers.


  • 5 Amanda // Feb 15, 2018 at 8:38 AM

    Businesses are not charities.
    Wages are the single biggest cost to business. Every business works on creating greater efficiencies in their roster, so it’s the same argument for reducing penalty rates as it is for tax cuts.
    In theory it should provide more working hours for staff…but that theory is destroyed when the business has no need to add additional hours to the roster. It’s money straight into the pocket of the business.


  • 6 Peter // Feb 15, 2018 at 9:08 AM

    On Monday page one of the Australian 4 CEOS (BHP Qantas + 2) all claiming Tax Cuts will allow them to increase wages. Other news this week BHP been taken to Fairwork over use of Body Hire Casuals instead of employing permanents under its own EBA. Now the ABC has produced data what large public companies do pay any large Tax at all. I think 30 or 40 % do not It appeared companies like Qantas was included. Yet Mr Joyce from the ABC still wants a Tax cut.

    Meanwhile in my Business, in NSW I am paying a new Tax to the State Government for supposedly recycling of drink containers. In my Town the only one that get a look in on refunds from the Container Deposit Station built on land controlled by Woolworths is you guessed it Woolworths where are you encouraged to spend refund Invoices in store. It also appears than less than 10% Container Deposit Levy A TAX is actually refunded.


  • 7 Jim // Feb 15, 2018 at 9:02 PM

    I see the connection. If the govt reduces the cost of doing business or increases the return on doing business, businesses will invest more. That creates more jobs which, with a lag, bids up wages. Its called fiscal stimulus.


  • 8 Mark Fletcher // Feb 16, 2018 at 12:37 AM

    I am not aware of any evidence that this is what actually happens.


  • 9 Jim // Feb 16, 2018 at 3:59 AM

    Probably because you arent looking for it. We all know you have an anti government agenda. Try the howard/costello era of tax rate reductions for starters. Plot that against wages growth. Just because you may not respond to a tax cut by increasing wages doesnt mean you wont end up having to pay higher wages. The market will do this for you. Its called the invisible hand.


  • 10 Mark Fletcher // Feb 16, 2018 at 8:44 AM

    You are wrong Jim. I have no such agenda. At my businesses wages growth is considerably ahead of the average, and above award where there is an award. I have owned businesses for more than 30 years. There is no connection between company profit and wages.

    As for the Howard / Costello era, what a bundle of lost opportunities from the mining book.


  • 11 Mark C // Feb 17, 2018 at 7:35 PM

    Jim a RBA report released in 2014 I think from memory attributed virtually all wages growth from 2000 to 2010 to the mining boom. Not Howard tax cuts. Mark is spot on the whole Howard / Costello era is full of lost opportunities.


  • 12 Jim // Feb 18, 2018 at 7:14 AM

    I would not disagree with the RBA. Mark should read more of their statements and research he may become better informed. Taking pot shots at the government is hardly insightful.

    You may also follow the US current episode where wages growth is responding to tax cuts. Im not suggesting its the only reason, but it is assisting the process.


  • 13 Mark Fletcher // Feb 18, 2018 at 8:21 AM

    I am in the US at the moment. There is no detailed reporting here of tax cuts leading to wage growth. Sure, there are headlines, but no reporting with evidence.

    The Reserve bank has not offered any support for the economic value to wages of a cut in taxes for business.


  • 14 Michele Stephens // Feb 19, 2018 at 8:29 AM

    Recommended reading:

    EMMA ALBERICI. There’s no case for a corporate tax cut when one in five of Australia’s top companies don’t pay it.


  • 15 Peter // Feb 19, 2018 at 11:22 AM

    Thank you Michele I was trying to point out my post Number 6 along with other issues.


  • 16 Pat // Feb 19, 2018 at 4:06 PM

    If the goal is increasing employment, instead of tax cuts they should incentivise employing workers and affect the actual costs. Something as simple as tax credits above the already deductible expense on employee costs would be more effective than an income tax cut. Most small businesses don’t make enough profit to see any appreciable difference from a rate cut, just the big ones (that actually pay tax). Or subsidies towards costs like Workplace Insurance premiums or towards low income super. Make it reliant on applying to permanent employees on 15 hours or more a week and and a small business.

    The difference in spending between a casual and a permanent is noticeable. They have some security and defined minimum income, meaning they are more inclined to spend especially through having better access to credit. The certainty of hours allows them to plan for things like self education, family or additional work.

    A tax cut is only an incentive to increase profits, the easiest way is usually to reduce employee costs and retain flexibility through casual or contract employment.


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