The 2015 Rethink tax white paper process also found that company taxes exert the heaviest drag, and cutting them would benefit workers by increasing investment and wages. But the government has struggled to win this argument in public, and has had to settle for tax cuts for companies with sales up to $50 million.

Robust

Mr Wende's work confirms the thrust of Rethink, but finds that higher-income earners will benefit proportionally more.

Mr Wende found the marginal excess burden, averaged across households, of company tax to be 83 cents in the dollar, versus 34 cents for personal income tax and 24 cents for the GST. Rethink put the marginal excess burden of company tax at 50 cents in the dollar, with stamp duties the least efficient at 80 cents in the dollar.

Mr Wende said this did not mean corporate tax is a bigger drag than Treasury believes. "It's relatively easy to move a number from 50 cents to 80 cents by changing key model parameters," he said.

"There is limited value in comparing numbers across models. The important insights we get from this analysis is comparing different taxes within one framework.

"Being able to say company income tax results in larger welfare losses than the other taxes is the important story and that result is very robust to parameter changes."


The immediate benefits of company tax cuts are skewed toward wealthier households, thanks largely to an equity market boost from the increased after-tax profits of firms. Lower-income households ​are​, on average, largely unaffecte​d. ​

Older, richer

"The main winners when you do a company tax cut is people who have high asset holdings, whether that's through superannuation or other investments," Mr Wende said. "That's generally going to be older, wealthier people."

Scott Morrison and big business fat cats. David Rowe

Highly skilled ​future workers are also major beneficiaries because they will be best placed to capitalise on wages growth.

"A company tax cut increases investment, which means over time productivity goes up and so too do wages," Mr Wende said.

"That helps people in the future, and higher-income earners to a greater extent."

On average, over-65s would be $1.32 worse off for every extra dollar raised through a company tax hike, but they suffer less from rises in personal income tax or the GST. This occurs as the model assumes any extra revenue generated is redistributed evenly via the transfer system. Low-income households would be 32 cents better off under an income tax rise and 16 cents better off if the GST increased, again due to the additional transfers.

Shadow Treasurer Chris Bowen has refused to say if Labor would keep the company tax cuts. Andrew Meares

"Company tax is the most harmful tax for all age groups, particularly retirees and future generations, and for all skill types," ​Centre for Independent Studies research fellow Michael Potter said.

"Skill type would be mirrored by wages, so this means that company tax is more harmful for the poor than personal tax or consumption."