Forget negative gearing - it's the other tax breaks that cost us dearly
No tax break has drawn quite the opprobrium of negative gearing, fingered as an egregious rort favouring the wealthy that punches a huge hole in federal finances, and drives up house prices to boot.
The assessment is not entirely without basis, but there are other concessions to home owners that cost the budget far more, and negative gearing sits well down on the list of factors affecting housing affordability.
Negative gearing allows investors to claim losses, including interest payments, associated with investments against other income. It applies to all investments, not just housing, and has been around since the 1930s.
The release by the National Archives of the cabinet papers for 1986 and 1987 revealed that former treasurer Paul Keating argued for abolishing negative gearing. He lost the argument.
According to an analysis by the Grattan Institute, the housing concession with the biggest cost to the federal budget is the exemption of owner-occupied homes from capital gains tax. It's hard to quantify, but it reckons it costs the federal budget about $15 billion a year in forgone revenue.
That compares with about $2 billion a year from abolishing negative gearing.
Scrapping the capital gains tax exemption on the family home is, of course, politically impossible. Its abolition would create uproar on the streets, cost many people hundreds of thousands of dollars, and likely lead to chaos in the housing market.
"A more achievable, although still difficult, reform would be to end the exemption of the family home from the pension assets test."
This would be a terrible idea of course. The family home is an illiquid asset. Its value may have been bid up to artificially high levels by market speculation. This idea would serve property speculators I suppose though, forcing people to sell off their houses if they want to survive.
"A more achievable, although still difficult, reform would be to end the exemption of the family home from the pension assets test."
This would be a terrible idea of course. The family home is an illiquid asset. Its value may have been bid up to artificially high levels by market speculation. This idea would serve property speculators I suppose though, forcing people to sell off their houses if they want to survive.
Ideas like that, and the one to tax the capital gains on family homes don't get any support in the electorate. Even people who don't own a house currently don't generally support them because they know that one day that might work to their disadvantage.
The support seems to come from males, over 40, divorced, lost most of their assets/savings in the marital settlement, and now desperately want to buy a house but can't afford one of the quality that they desire.
It's a very small demographic that has almost zero political pull. But they are vocal.
Any expressed market opinion is my own and is not to be taken as financial advice
In the US people don't have to pay CGT on their ppor sale if they continue with another one. One top of that private owners can claim interest payments against 2 residential properties. In Aus we are disadvantaged.
Plus it is all a con of the fiat money. My dogbox is up 10% in gold in the 20 years I've had it.
Meanwhile the secret tax of devaluing the currency is hard at work.
One of the bull arguments for buying a house is forced saving. Saving suggest later spending... Now it is ok to NOT force these people to spend their "saved" wealth, but it is OK to force people to spend actual saved cash, through massive interest cuts? To make things even, you should tax people on the interest saved by paying off their mortgage or offset accounts. In other words, if you "saved" yourself 5% interest on the $10K you are paid in advance, this should be subject to taxation.
All arguments about what should be taxed are nothing more than one segment of the electorate using political power to steal from another segment. The government prints all the money, enforces it as legal tender, enforces property rights and contracts through the threat of violence. All of your money and your possessions belong to the government, how much of it they let you play with depends on how hard they think you will work given the incentive to do so. More incentive == harder work.
All arguments about what should be taxed are nothing more than one segment of the electorate using political power to steal from another segment. The government prints all the money, enforces it as legal tender, enforces property rights and contracts through the threat of violence. All of your money and your possessions belong to the government, how much of it they let you play with depends on how hard they think you will work given the incentive to do so. More incentive == harder work.
I agree with that. To manage the economy the government really has to manage the population by giving them enough incentives to remain industrious, but not so many that they all decide that they don't need to work again.
They have to keep dangling carrots in front of us. Luckily our natural greed and want of blingy things does most of the work for them.
Any expressed market opinion is my own and is not to be taken as financial advice
Removing NG would probably crash property. But that's correct it's not the main culprit.
It's mass immigration and cheap money. The left are scum because they'd rather bury their head in the sand than admit that their kumba ya policy of mass immigration is sick and deranged and criminal.
At least the right knows they're sick, deranged and criminal.
As Count says it's an honest evil!
stinkbug omosessuale Frank Castle is a liar and a criminal. He will often deliberately take people out of context and use straw man arguments. Frank finally and unintentionally gives it up and admits he got where he is, primarily via dumb luck! See here Property will be 50-70% off by 2016.
What industry is that?.....Shopping? Buying and selling the same property to each other? Importing goods from overseas? Or working for the government?
None of the above
peter fraser
2 Jan 2014, 09:37 AM
I agree with that. To manage the economy the government really has to manage the population by giving them enough incentives to remain industrious, but not so many that they all decide that they don't need to work again.
They have to keep dangling carrots in front of us. Luckily our natural greed and want of blingy things does most of the work for them.
Indeed. Successful governance is really no different from successful animal husbandry. It is a balance between keeping the population fat and happy (ready for slaughter), but no so fat and happy they stop breeding.
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