I missed this earlier in the week. But Labor treasury spokesman, Chris Bowen, confirmed that the party would stick with its policy to curb property tax concessions. From Sky News:
Labor’s new front bench will stick to its plans to limit tax concessions on housing investment but is willing to listen to the Turnbull government should it change its mind on negative gearing…
Labor will continue to pursue changes to negative gearing, but said if the government came around to reforming these tax concessions ‘they will get a tick from us’.
Good news. Labor’s policy to restrict negative gearing to new builds and reduce the capital gains tax (CGT) discount certainly did not hinder its performance at the recent Federal Election. Quite the opposite in fact.
It’s been 85 years since a one-term government has been toppled. And given where Labor was just 10 months ago, it’s a remarkable achievement that it managed to push the Coalition to the brink.
One of the reasons that Labor rebounded so strongly back into contention is that it lead on the policy front – including on negative gearing and the CGT discount – and in the process restored its economic credibility.
Therefore, it could easily argue that its property tax reforms got Labor closer than it would have otherwise. Moreover, the Coalition seemed to hit the lowest point during the election campaign when it directly attacked Labor’s negative gearing and CGT policy. As soon as it began to stay quiet on the issue, the Coalition’s standing seemed to improve in the polls.
The fact is that despite the huge sums of money and efforts of the property lobby to fight Labor’s reforms, the scare campaign around prices, rents and the economy fell flat. The property lobby fired its best shots and missed. The electorate failed to take the bait and saw the scare campaign for what it was: blatant rent-seeking by vested interests more concerned with lining their own pockets than the national good.
This latest election result has taught our politicians that negative gearing is no longer the political sacred cow that was once believed. Future politicians can be confident of proposing reforms to negative gearing and the CGT discount without fear of blowing-up their electoral chances.
That said, reforms to the CGT discount in isolation probably has the best chance for change, with the Nick Xenophon Team and even the Property Council of Australia supporting reform, backed by Labor.
I, too, would be happy with this outcome, since the CGT discount is what made negative gearing more attractive in the first place, so its unwinding would obviously go a long way to removing the distortions caused by the inter-play between these two tax policies.
There’s life in the old reform dog yet.
