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If Australia's top economists were deciding the election, they'd vote for Labor's cuts to negative gearing and against the Coalition's cuts to company tax.
Of the 23 leading economists polled for the Scope BusinessDay Economic Survey, those that answered the questions about tax backed Labor's plan 10 to three and opposed the Coalition's plan 10 to six.
The key objection to the Coalition's company tax cuts was that they would have to be funded, most likely from bracket creep, higher taxes, or cuts to government spending. Estimates of the ongoing cost range from $9 billion to $13 billion per year.
"The money should come from reducing superannuation tax breaks, negative gearing tax breaks and other forms of upper class welfare," said BIS Shrapnel chief forecaster Richard Robinson.
"On balance, it is not a good idea. There are very little or dubious benefits for such a large outlay that could be better used to reduce the deficit. If higher investment is the aim, it's better to use targeted investment incentives, R&D tax breaks, and improved workforce skills via higher education spending."
Industry Super chief economist Stephen Anthony said much of the money should be found by paring back corporate welfare, but he said even if it was the tax system would become more heavily reliant on personal income tax which did "not sound efficiency improving".
Saul Eslake said evidence from the OECD showed the biggest bang for the buck came from cutting taxes for new rather than existing businesses, "which would be cheaper than a general company tax cut since there are by definition fewer new businesses."
A supporter of a cut, Monash University researcher Jakob Madsen, said it should not apply to mining companies, builders or property developers and banks because they would "just pocket the extra profit without creating jobs".
The results echo those of a survey conducted by the Economic Society of Australia this week which found that Australia would receive a bigger long run benefit from spending on education than spending the same amount cutting company tax.
Supporters of Labor's plan to wind back negative gearing and capital gains tax concessions generally agreed with the proposition that they would result in lower house prices than otherwise, but said that was a good thing.
"Halving the capital gains discount on housing investment returns is overdue and has arguably been one of the worst policies enacted under Howard-Costello," said BIS Shrapnel's Richard Robinson.
Peter Martin is economics editor of The Age.
