In sealing Trump’s first major legislative victory, Republicans steamrolled opposition from Democrats to pass a bill that slashes taxes for corporations and the wealthy while giving mixed, temporary tax relief to middle-class Americans.
The House approved the measure, 224-201, passing it for the second time in two days after a procedural foul-up forced another vote on Wednesday. The Senate had passed it 51-48 in the early hours of Wednesday.
Australian Finance Minister Mathias Cormann today warned that Australia must follow the United States in slashing corporate tax rates or risk losing jobs and investment to other parts of the world.
The Federal Government is restating its pitch to reduce the company tax rate for all businesses from 30 per cent to 25 per cent after Trump’s overhaul passed overnight.
“We need to ensure that our businesses have the best possible opportunity to succeed – we can’t leave them with this excessive lead in their saddle bag,” Cormann told Sky News.
“The future job security, the future career prospects, the future wage increases of Australian workers depend on the Australian parliament passing a more competitive business tax rate here in Australia.”
Treasury has warned the Federal Government it must respond to the US move or else suffer a one per cent hit to Australia’s economic growth.
Failing to act could trigger a significant recessionary impact and force downward pressure on revenue, harming the sustainability of the tax base and the provision of essential services, the Treasury briefing said.
The Treasury analysis described the “broken nexus” between Australia and other OECD countries, and urged the Turnbull government to implement the next round of corporate tax cuts or cop a whack to the budget.
Cormann sought to use the Treasury modelling as ammunition against the Labor Party, who oppose big business tax cuts.
“If Bill Shorten decides to continue to stand in the way of a business tax rate of 25 per cent in Australia, he is making a decision to wilfully damage the Australian economy,” he said.
But Ben Oquist, from the left-leaning think tank The Australia Institute, said the only beneficiaries from a corporate tax cut would be foreign multinationals and investors.
“It’s an international race to the bottom that serves a few, and not the economy overall, or society overall,” he told reporters in Canberra.
“Less revenue for the government means less spending on health, education, social services, and more money for the big end of town. That’s less for ordinary Australians, and more for wealthy Australians.”
The institute has released polling from three of the richest seats in Australia – Wentworth, Warringah and Kooyong – which shows the majority of voters are against tax relief for the big end of town.
“The Senate should resist pressure to cut the company tax rate further. Company tax rate for businesses up to $50 million is enough,” Oquist said.
Trump had emphasised a tax cut for middle-class Americans during his 2016 campaign.
“It’s the largest tax cut in the history of our country,” Trump said at a White House ceremony.
The House vote on Wednesday was the final hurdle before it was sent to Trump to become law. No Democrats voted for it, and they were joined in opposition by 12 Republicans.
It is unclear when Trump will actually sign the legislation.
The Senate passed the massive tax bill early, but the House, which had cleared it, had to vote on it again because of revisions made to the legislation.
“In this bill, not only do we have massive tax cuts and tax reform, we have essentially repealed Obamacare, and we will come up with something that is much better,” Trump told reporters. The legislation also repeals the individual mandate that required Americans to purchase health insurance.
The legislation has significant implications for Hollywood, including a massive tax cut for media companies. But there is a lot of anxiety among a number of individuals in the industry, who worry about the loss of key deductions. That will be especially true in states like California, New York, and New Jersey, where some taxpayers will face a higher liability..
House Minority Leader Chuck Schumer said that “tax breaks don’t lead to job creation. They lead to big CEO salaries and money for the very, very wealthy”.
He also spoke out against the legislation before the Senate vote, but was irritated as some Republican colleagues talked during his speech.
“We believe you’re messing up America. You could pay attention for a couple of minutes,” he said.
The debt-financed legislation cuts the US corporate income tax rate to 21 per cent, gives other business owners a new 20 per cent deduction on business income and reshapes how the government taxes multinational corporations along the lines the country’s largest businesses have recommended for years.
Millions of Americans would stop itemising deductions under the bill, putting tax breaks that incentivise home ownership and charitable donations out of their reach, but also making tax returns somewhat simpler and shorter.
Democrats have called the tax legislation a giveaway to the wealthy that will widen the income gap between rich and poor, while adding $US1.5 trillion over the next decade to the $US20 trillion national debt.
“Today the Republicans take their victory lap for successfully pillaging the American middle class to benefit the powerful and the privileged,” said House Democratic leader Nancy Pelosi.
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