Not every CEO is a fat cat, child-eating imperialist

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Eyes seem to roll when business and business groups like the Australian Chamber of Commerce and Industry (ACCI) call for tax cuts — which is a pity. It’s not like many (or any really) of Australia’s 2 million-plus businesses are fat cat imperialists who like nothing more than to exploit workers and eat small children.

There is bad behaviour certainly. Unethical and illegal behaviour, and our society — the media and other businesses — rightly calls them out. We should continue to work together to weed out these individuals.

But for the vast majority, the truth is much more sobering. The businesses that ACCI represents are overwhelmingly made up of ordinary, hardworking Australians. Mums and dads with kids and a mortgage, who’ve taken a significant risk in setting up a small business – in employing people. These are people who often earn little more — and just as often less — than the annual average wage. We are not talking about employee-exploiting capitalists here.

The majority are people of good will, who want only what is good for the country — for their kids, their staff, their customers — and for future generations. They want the nation to be prosperous — today and into the future — and for all Australians to share in that prosperity. Happiness for themselves and for others.

Now we need taxes and no one in business suggests we don’t. Remember, these are families — their kids go to schools, often state schools. They go to the doctor, use hospitals, TAFE, university and their garbage gets collected — they see the value of tax. Just like you.

Having said that, when someone takes a significant amount of risk — when they risk their house, their financial security, their livelihood, etc, to set up a business — they gain perspective: an appreciation of the value of hard work and the value of money — and not wasting it.

Now, when you remember that each dollar that the government raises in tax is one dollar less that a business or household — families in nearly every case — has to spend on non-government goods and services, then you realise that there is a cost to taxation. It reallocates spending in an economy. So one dollar more to the government is one dollar less that business and families have to spend on (the ever rising costs of) electricity, food, clothes, preventative medical care — whatever the case may be. For a business, this might be a new computer, or a piece of manufacturing equipment, etc. This means less spending in those areas of the economy, fewer jobs and less investment.

To a certain extent, the cost of tax on families and businesses is necessary, sure. We obviously need schools, hospitals and we must look after those in need. That goes without saying and no one argues against it. And, naturally enough, government spending in those areas creates jobs and investment in those areas. Jobs and investment that we desperately need. But government investment in schools and health isn’t free — it needs to be paid for.

The temptation for some is to simply call for higher taxes. But this is misguided, as higher taxes don’t grow an economy. As discussed, they simply take money away from business investment, or family spending. High taxes and tax hikes are divisive. Think of it, at a basic level, of people fighting over the pie — not trying to grow it.

Tax cuts, in contrast, grow the pie and ultimately allow for greater investment and money spent across all areas of the economy. More on schools, more on health — more on creating jobs and investment in the government and in business.

How does this work? Well, it ain’t by magic.

Look around at what’s happening in the world. We live in a world of intensifying global competition and in an age of seemingly rapid and accelerating technological disruption. So we need to be smart.

We need to ensure that Australia is an attractive place to do business — that businesses have the resources they need to invest and attract the staff they need to compete. And that means ensuring that the burden of taxation is not too high.

It’s in this way that a tax cut can drive business investment and employment growth — it puts extra money in the hands of businesses and families who then spend it. Lower taxes on business (and households) make our nation more competitive and drives investment, jobs and overall economic activity.

And as the economy grows and businesses and households become more numerous and wealthier, guess what: taxation revenue lifts as well. It makes sense, right? Because there are more businesses and a greater number of people with jobs. It is in this way that tax cuts grow the pie, grow the economy and make the nation as a whole wealthier. This ultimately gives us much more money to spend on all those government services that cost money, but that we want and need — health, education and social services.