Donald Trump lays out a model for Malcolm Turnbull’s tax cut plan

Malcolm Turnbull has doubled down on the unlegislated corporate tax cuts, vowing to take them back to the Senate when parliament resumes.

But there is little prospect that the narrative he is now weaving around them will make them any more palatable to a Senate that shows absolutely no sign of ­buckling.

The Prime Minister’s only chance of success may be to mimic what Donald Trump has done, rather than just echoing what he has said.

Turnbull’s headland speech yesterday drew heavily from the same well that the US President tapped for his State of the Union address a day earlier in talking up the social and economic dividends of company tax cuts.

For most working Australians, however, the case for big business getting tax relief is still largely theoretical. Moreover, it is unpopular.

For Trump, the dividends are real-life and tangible.

And this has come about largely because of a social compact with corporate America that is noticeably absent here.

About 200 companies in the US have already announced bonus payments and wage rises to millions of employees on the back of the tax cuts. Some have committed to divert profits for philanthropy while others have pledged billions of dollars into pension funds.

This is the social compact that corporate America has made with Trump in exchange for slashing the company tax rate from 35 per cent (one of the highest in the OECD) to 21 per cent (now one of the lowest).

This was no small achievement for a US President who campaigned on behalf of the “forgotten people” and who, like Turnbull, was regarded as having little prospect of getting it done.

In the US, Trump argues that it is those forgotten people who are now reaping the “rewards” (a term Turnbull yesterday emphasised as the theme of his political agenda for 2018) of the corporate tax cuts.

American Airlines has given $US1000 bonuses to 130,000 of its workers on the back of the cuts. AT&T has done the same for 200,000 of its employees. FedEx has handed out $US200 million in pay rises and put $US1.5 billion into pension plans. Even the banks have been generous. Bank of America has awarded all its workers earning less than $US150,000 — about 145,000 in total — the same $US1000 one-off bonus. Walmart has raised its minimum wage as has Wellsfargo, and Disney has splashed $US125m in bonuses to 125,000 workers.

The real-life dividends from the corporate tax cuts back to workers is already tens of billions of dollars. This is cold hard cash in the hip pocket.

The swiftness with which corporate America responded with wage bonuses suggests that there may have been private pre-commitments secured by Trump on the basis of a moral obligation to share the dividends of the cuts.

Turnbull does not have this or any commitment even remotely like it, other than abstract suggestions by some of our larger employers that they would be inclined to employ more people if the tax rate was cut. In essence, he has to try to do what Trump did, in reverse.

The real-life effects of Trump’s tax cuts came after he got them passed. While Turnbull does not have that luxury, there is a compelling argument that a pre-commitment from the top 20 Australian companies of a social dividend such as that secured in the US could change the game.

The linkage Turnbull tried to make between company tax cuts and personal income tax cuts will not be enough to seduce the Senate, where Labor would simply argue that it would support one and not the other.

Presenting a case where the Senate would be voting against putting $1000 in the hip-pockets of several million workers would make for a powerful political gambit.

There are obvious differences with the US and Australian models. Trump’s tax cuts were immediate. Australia’s are on a “glide path” over the next six to seven years.

Companies would also rightly be reluctant to pledge to hard and fast numbers that they might be forced to withdraw if the legislation fell over.

Nevertheless, the idea of a social compact is far from being a bad one.

The government needs something to sweeten the deal.