Pesky facts keep blowing holes in the economic story that the treasurer, Scott Morrison, had prepared for this year’s election campaign. Namely that Labor’s “tax and spend” policies are a terrible economic threat, while his own plan to cut spending, and maybe company taxes as well, will lead to a guaranteed happy ending.

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It’s not entirely a fairytale – of course governments need to be as frugal as possible and of course business taxes can’t be too high. But the treasurer’s take, in which spending is the only villain in the story and tax cuts the obvious hero, is increasingly at odds with the evidence, leaving the Turnbull government with an unconvincing narrative just a few weeks from its budget and a few months from the election campaign.

First this week came modelling from Janine Dixon of the centre of policy studies at Victoria University, which showed a company tax cut would reduce real domestic incomes with much of the benefit going to foreign owners in the form of higher net profits. Well, that sure doesn’t fit the script.

And then came the open letter from 50 prominent Australians, including the former governor of the Reserve Bank Bernie Fraser, who respectfully suggested that, since Australia is struggling to pay for things like hospitals and schools, and since inequality is already rising, it might be a bad time to think about cutting the taxes that companies pay.

That intervention, organised by the Australia Institute think tank, really seemed to get under Morrison’s skin and that of those who agree with his economic story, especially the editorial writers at the Australian Financial Review and the Australian. They even even “exclusively” revealed that the chief executive of the Institute of Public Affairs, John Roskam, had dubbed the signatories the “fatuous 50”, apparently because some worked for publicly funded institutions and therefore obviously didn’t understand stuff.

But inconveniently for the government and its backers, many of the arguments used to bolster the “we only have a spending problem, not a revenue problem” morality tale don’t quite stand up to scrutiny.

They argue, for example, that cutting company tax will certainly attract foreign capital and grow the economy and deliver the money to pay for services.

Except we now know a lot of those companies pay way less than the actual company tax rate, and some of them don’t pay any tax at all. Before Christmas, the Australian tax commissioner published the tax details of 1,500 large corporate taxpayers which showed one-third paid no tax in 2014. Some of the biggest foreign companies pay almost no net tax.

And we know that when we cut company tax from 49% to 30%, between the 1980s and early 2000, foreign investment as a share of gross domestic product (GDP) stayed more or less the same. And we know many companies from countries with way lower tax rates than ours still invest lots of money here. So, while you wouldn’t want a clearly uncompetitive business tax regime, lower company taxes don’t actually lead directly to more investment or more revenue.

Morrison also argues that Labor’s revenue plans will “increase the tax burden” on ordinary Australians by $100bn which will be terrible and unbearable and very bad for “jobs and growth”.

But much of Labor’s revenue raising comes from reducing tax concessions used mostly by the wealthy – on superannuation and negative gearing, for instance – or from changing the rules to circumvent some of the multinationals’ rampant tax minimisation. (Morrison’s backers sometimes switch arguments here and argue “class warfare”, which somewhat contradicts the “increase the tax burden on ordinary Australians” point.)

And, as I have written previously, there is an increasing consensus that spending in a way that slows increasing inequality is actually essential for continued economic growth, and that widening inequality hurts it – including from bodies the Morrison backers often like to quote, like the IMF or the OECD.

Properly targeted, the extra spending to stop disadvantaged schools, and students, from falling further behind – as recommended by the Gonski review – would surely qualify as spending that makes economic sense in the longer term.

According to the AFR at least, there has been no “substantial” increase in inequality in Australia – guess it depends on what you mean by substantial.

Between 1975 to 2014 real wages for the bottom 10th rose by $7,000, and for the top 10th $47,000. In percentage terms the earnings of those at the bottom rose 23%, while those at the top saw earnings rise by 72%.

And by week’s end even Moody’s ratings agency, one of the bodies whose good opinion Morrison cited as reason for the need to cut spending, said the government would likely have to both cut spending and raise taxes to keep its AAA rating, and the government appeared likely to follow Labor’s lead and raise cigarette excise – something the former prime minister Tony Abbott had already helpfully labelled a “worker’s tax”.

Oh, and “tax and spend’ Bill Shorten did not rule out using some of the revenue he intends to raise to give some kind of personal income tax cut.

That really wouldn’t be the final chapter Morrison was banking on.

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The government’s budget is likely to offer targeted tax concessions to boost investment, by no means a bad idea. It could use increased borrowings to spend more on cities, roads and economic infrastructure, also sensible ways to increase productivity and economic growth.

But in the lead-up to the budget, the Turnbull government is losing the economic narrative.

The headline political news is the way the government is on the defensive over Labor’s demand for a royal commission into the banks, a neat political trope, especially since Turnbull is a former banker and, under Abbott, the Coalition cut funding to the banking regulator. But in reality both sides of politics know something needs to be done about the culture of the banks.

Far more significant is the way facts keep undermining the Coalition’s central “we only have a spending problem” economic story.