MEDIA RELEASE: Australia Must Respond to Trump’s Tax Reform or Risk Recession
The Australian Taxpayers’ Alliance, a non-partisan grassroots advocacy body representing the interests of Australian taxpayers, today called on the Australian Government to implement urgent, drastic tax relief in response to the US Government passing the largest tax reform package in decades. Over the next decade, the Tax Cuts and Jobs Act reduces taxes by $5.5USD trillion and eliminates $4.5USD trillion worth of distortionary credits and deductions.
“Unless the Turnbull Government commits to an urgent overhaul of our outdated tax system, the Australian economy will be left out in the cold” said Tim Andrews, Executive Director of the Australian Taxpayers’ Alliance.
“The United States overnight is lowering its company tax from 35% to 21%, attracting investment while simultaneously boosting hiring and wages. Meanwhile, the Australian company tax becomes the second highest in the developed world, forcing businesses to flee offshore. Treasury confirmed this will lower economic growth by a 1%. The modest proposal by the Turnbull Government to delicately trim company tax to 25% over a decade is simply not good enough. Company tax must be slashed – and now – to avoid Australian economic stagnation or worse.
“Furthermore, 80% of US workers received significant cuts in income taxes. An average family of four on median income will receive a tax cut of over $2,000 USD. Meanwhile, Australian income taxes have gone up through increasing the Medicare Levy and through bracket creep. The PBO has confirmed someone earning $46,000 will have their tax bill increase 21.5% by 2021. Lest we forget soaring energy costs and home values cutting further into pockets.
“A median wage earner in the United States will now pay a top federal marginal income tax rate of just 22% while a median Australian worker will face a marginal tax rate of 37% - a whopping 15% difference. The top marginal rate in the United States will be 37%, and only apply after $500,000 US vs Australia’s 47.5% kicking in at just $180,000 AUD. Australia risks suffering significant brain-drain as skilled workers flee our tax regime for the United States. In addition, significant simplification of the tax code and removal of distortionary deductions means 94% of Americans will be able to file taxes quickly, in contrast to the burdensome process for most taxpayers in Australia.
“In the hours since Tax Reform passed, US companies have already responded by increasing salaries and capital investment throughout the US. AT&T is giving $1,000 bonuses to 200,000 U.S. employees and will increase U.S. capital spending by $1 billion because of reform. Comcast not only gave $1,000 bonuses to 100,000 employees but pledged to invest $50 billion in infrastructure. Wells Fargo & Fifth Third Bankcorp increased the wages of all employees on top of bonuses. The list will continue to grow, while Australia misses out.
“To avoid a recession, Australia needs to get serious about tax reform. We need to drastically lower the company tax rate immediately as well as reduce the tax burden on individuals and families with a simpler, fairer, and flatter income tax”
Australian Taxpayers’ Alliance