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Monday, March 21, 2016:

Sinodinos takes new page from negative-gearing playbook

By Gavin R. Putland

Ever since full deductibility of negative gearing was reinstated in 1987, successive federal governments have pretended that the best way to help tenants is to give tax concessions to landlords — without making those concessions contingent on building houses or finding tenants. The current Opposition has belatedly promised to address the former shortcoming but not the latter, while the Government still refuses to address either.

Cabinet Secretary Arthur Sinodinos has just taken another page from the same old playbook, suggesting that the best way to help workers is to cut taxes for companies — without making the tax cuts contingent on hiring more workers.

Memo to Senator Sinodinos: If you really want more jobs, better job security and better pay, you cut taxes on employers in their capacity as employers, not in their capacity as asset owners. In other words, you cut taxes that cause the cost of hiring a worker to exceed the worker's take-home pay.

For example, if you reduce the compulsory superannuation contribution and compensate the workers by cutting the contribution tax, the net result is to reduce labour costs for employers without reducing workers' spending power or saving rates.

But you can go much further than that. It is quite possible to abolish PAYG personal income tax in the hands of employers, thereby reducing labour costs without reducing take-home pay. As the benefit of the tax cut would be passed on in a highly equitable manner, there would be numerous ways of replacing the revenue without making the overall system any less equitable. But of course you wouldn't need to replace all of the forgone revenue, because the ensuing fall in unemployment would solve numerous problems that governments presently throw money at.

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