Kelly O'Dwyer's considered response on Q&A to questions about the rich v poor divide neatly illustrates what this election, in economic terms, is really all about, writes Michael Bradley.

The fault line in this election has already been exposed, by an unlikely person called Duncan Storrar.

Duncan, an audience member on Q&A, says he has a disability and low education, and is a minimum wage earner. He lives in public housing, has two young children and works as an itinerant truck driver. The media has of course since revealed that he is not in fact the Messiah, but his job was already done.

Duncan asked the panel why the income tax cuts in the budget will only go to rich people who won't notice them, when a small cut would change the lives of people in his position. After failing to get a straight answer from Assistant Treasurer Kelly O'Dwyer, Duncan tried again:

"Low-income earners lose more money, because every penny we pay in tax, is ... that's money we don't have to spend at the bottom end. People who make $80,000 a year, don't know who they are, well, they don't even notice it, love. We notice that sort of stuff."

Only in Australia do you get to call a cabinet minister "love", to her face. O'Dwyer's considered response to the conundrum which Duncan was expressing neatly illustrates what this election, in economic terms, is really all about.

O'Dwyer said this:

We want to grow the economy, we want to create more jobs. We want to give people an incentive to work, to invest in their businesses and to employ people and create better lives for themselves. That is what our plan is all about... We have got a company tax cut for small businesses with a turnover of between $2 million and $10 million. Now, you might say, "Well, that's terrible," but it's not, because what it does is it creates more jobs. It will mean that those businesses can reinvest and employ more people.

Later in the debate, she added:

I have sat down with small business, because I'm the Small Business Minister and I've talked to them. One of the cafe owners I spoke to the other day has got a turnover of just over $2 million. As a result of our change, our tax cut on the first of July this year, he will have access to the instant asset write-off, which means he can invest in his business, a $6,000 toaster, which means he can get more customers through his business on a Saturday... He's going to derive more revenue and he's told me that he is going to put more people on. This is the result of the changes we are making. It will affect people's lives in a very positive way.

O'Dwyer was stating in simple language the theory of supply-side, or "trickle-down", economics. It is the central economic foundation of the great neo-liberal experiment which has dominated Western economies since Ronald Reagan took office in 1981.

The idea is easy to grasp: If the government provides incentives to businesses and their owners to work harder and invest more, by reducing the tax they pay on their earnings, then they will naturally and inevitably use the extra money to produce a higher level of economic growth, which will create more and higher-paying jobs, in a virtuous circle which ends up benefiting absolutely everyone - even the poor.

O'Dwyer's cafe owner exemplifies this cycle: The government is giving him a tax cut; he will use the extra money to buy expensive equipment which will make his business more efficient and productive, enabling him to serve more customers, for which he will need to hire more staff. It follows, as night follows day, that eventually Duncan is going to get more work delivering bread to the cafe to feed the $6,000 toaster (which apparently can churn out 1,000 slices an hour). What's not to love in that equation of economic turbo-charging?

Well, let's test the theory with an another small business owner - me. I run a business that turns over between $2 million and $10 million a year, so we will be getting the exciting tax cut O'Dwyer is offering. Will we use it to create jobs?

No, we won't, and it isn't because we're greedy lawyers. It's because we're being sold a cheap con.

For starters, O'Dwyer was talking rubbish to Duncan. She conflated the income tax cut (which will reduce the tax rate for businesses with revenue below $10 million to 27.5 per cent) with the budget's expansion of the accelerated depreciation concession which allows small businesses to immediately deduct the full cost of capital expenditure on items costing up to $20,000, instead of depreciating it over a number of years. Thus the $6,000 toaster; it has nothing to do with the tax cut.

Secondly, the accelerated depreciation is a timing benefit only; you may pay less tax in the first year, but over time your tax bill will be no different. The potential benefit isn't less tax; it's the extra revenue and profit you hope will flow from buying more equipment, which you hope to afford by getting the upfront deduction.

It's not a bad thing for small businesses, but the Howard government's Review of Business Taxation failed to find a compelling case that accelerated depreciation actually benefits the economy through higher business investment.

As for the actual tax cut - OK, our business will pay 2.5 per cent less in tax on its profits next year. What will the shareholders in that business do with the extra money? We'll save it, so that we can give it to the ATO to cover the corresponding increase in our personal income tax bills.

The ultimate owners of companies are people, and they pay income tax on their dividend earnings. If the company is paying less tax, then the franking credit on the dividends is reduced, so the amount the individual shareholders have to pay to make up the difference goes up by the same amount. The net effect is zero. The resulting economic growth is also zero.

It's true that two types of companies and shareholders will derive a net benefit from a company tax cut. First, companies that reinvest the extra profit rather than distribute it as a dividend will get a benefit. However, most small businesses distribute all their profits as dividends because their owners rely on that as their personal income. Secondly, there are the shareholders who don't pay income tax in Australia, either because they live overseas or because they use Panama-style tax "minimisation" structures. As Duncan would say, rich people.

That's all just a long way of saying that the small business tax bonanza the Government is selling is largely illusory. In the bigger picture, 45 years of trickle-down experiments, promising that the rivers of money which have flowed to corporations and the rich will turn into "jobs and growth" for all, have delivered one clear outcome: a massive and sustained increase in income and wealth inequality.

Wealth is now concentrated at the top to a greater extent than ever. Further, the International Monetary Fund found in a study last year that, as more money is pushed towards high income earners, economic growth actually slows down. The facts unarguably demonstrate that the theory of trickle-down economics is, as Nobel Prize-winning economist Joseph Stiglitz describes it, "absolutely wrong".

It's this simple - if you give money to the rich, it makes them richer. The small part of that wealth which they choose to apply to discretionary spending adds vastly less to the economy than what it loses from the ever-increasing concentration of wealth. To put it another way: how much jobs and growth is created by one rich person paying another rich person $30 million for their harbourside house?

It seems strange that we're being sold the benefits of an entirely discredited theory by a party and Prime Minister who claim to be the experts at this economics stuff.

Duncan asked: "Why don't I get it?" The answer, Duncan, is that you're not supposed to. It's a private joke.

Michael Bradley is the managing partner of Sydney law firm Marque Lawyers, and he writes a weekly column for The Drum. He tweets at @marquelawyers.