Labor have been dealt a credibility boost in the lead-up to this weekend’s Federal Election with an overwhelming majority of economists surveyed by Fairfax revealing that they support Labor’s plan to unwind negative gearing over the Coalition’s plan to drop the company tax rate from 30% to 25%. From Peter Martin:
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…
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…
Who would have thought? Rejigging a tax lurk so that it no longer encourages speculative investment into existing housing beats a tax giveaway to foreign owners/investors.
As noted by SQM Research’s Louis Christopher last year:
[Negative gearing] was actually first introduced in 1936 with the direct aim to increase the supply of housing and move the economy forward from the Great Depression.
The problem is when it is applied on existing properties there is no real tangible economic benefit. Instead, it is unnecessarily stimulating demand on existing housing and, therefore, pushing house prices artificially upwards and so, damaging affordability…
I firmly believe negative gearing should be restricted to new residential real estate. By allowing negative gearing on new residential properties and off-the-plan developments, we are providing a proper tax benefit to where it is justified and needed most: the construction and development of new dwellings…
If governments wish to improve affordability in the market, restricting negative gearing to new homes would be ideal. It would stimulate new housing and reduce investor activity on existing housing.
Well said. Which is why Labor’s policy is worthwhile.
