Find above an interesting discussion on ABC’s Insiders program yesterday in which the topic of negative gearing and tax concessions more broadly were discussed in the context of Budget fairness.
On the one side, there is Lenore Taylor and David Marr arguing that the exclusion of tax lurks like negative gearing and superannuation from cuts, while targeting more vulnerable households, has fundamentally eroded the equity of the Budget.
On the other is Gerard Henderson, who argues that the wealthy pay too much tax and that abolishing negative gearing in the mid-to-late 1980s was “counter-productive [and] led to a situation where fewer apartments and flats were built, and rents went up”.
I won’t go into all of the reasons why Henderson’s comments about negative gearing do not hold water, since these were covered in detail on Friday (as well as numerous times previously). All I will do is point Henderson to the below data showing the huge decline in the proportion of investors constructing dwellings since negative gearing was re-introduced in September 1987 (see next chart).
And the negligible (if any) impact on rents when negative gearing losses were quarantined between June 1985 and September 1987 (shown in red):
Of course, Lenore Taylor and David Marr are 100% correct. Genuine Budget reform requires cutting into higher-income welfare, such as superannuation tax concessions and negative gearing. Reforming these tax lurks would deliver substantial Budget savings while improving the progressiveness and equity of the tax and welfare systems.
Unfortunately, Labor appears not much better on this front. When asked yesterday on Insiders if Labor “would bring negative gearing back into play”, Tony Burke responded that “I’m not contemplating anything like that. I’m not going to get into a rule-in, rule-out game, but nothing like that’s in contemplation” (see from the 18.35 minute mark here).
