Judith Sloan’s negative gearing delusion

By Leith van Onselen

After her dreadful defences of negative gearing in July and September (thoroughly debunked here and here), The Australian’s Judith Sloan has returned with another abusive post aimed squarely at us “lefty” doomsayers that dare question the merits of Australia’s famed tax expenditures on investment property.

Let’s take a look at Sloan’s latest installment:

HERE we go again. If only the government were to ditch negative gearing on residential real estate then our budget woes would disappear…

Who is calling for this? The Fairfax dailies — whose diminishing number of readers without doubt own geared rental properties at a much higher rate than the population.

Way to start with the strawman arguments, Judith. Who has claimed that Australia’s budget woes would “disappear” if negative gearing was abolished? No one that I know of. Yes, ‘abolishing’ negative gearing would certainly have a positive budget impact – $2 billion per annum according to the Grattan Institute – but it is no budget panacea.

As for your claim that the campaign to abolish negative gearing is some kind of Fairfax conspiracy, get a grip. Did you not read the Final Report of the Murray Financial System Inquiry, which argued for the removal of negative gearing and capital gains tax concessions on investment homes, with David Murray himself claiming that these concessions “drives up prices” and “does nothing to help affordability of homes”.

Moreover, on balance, Fairfax property coverage is in toto notorious for its favourable coverage.

Back to Sloan:

Being able to deduct costs associated with investing in an income-­producing asset has always been part of the tax code. It does not simply apply to housing.

To eliminate negative gearing would be to introduce double taxation. The flip side of an investor taking a loan to buy an asset is a lender providing the loan. And that lender pays taxation on the associated profit.

Let’s get something straight. What most opponents of negative gearing are seeking is the quarantining of negative gearing losses on all assets – so that interest and other costs related to an asset can only be offset against the same asset’s income. It is also what happened when the Hawke Government temporarily ‘abolished’ negative gearing between 1985 and 1987. Such tax treatment is standard practice across most developed nations, which do not allow costs related to an investment to be deducted against non-related income (e.g. wages and salary). Australia and New Zealand are outliers in this regard.

Sloan’s argument that “the flip side of an investor taking a loan to buy an asset is a lender providing the loan” and that to disallow the cost of borrowing by investors would amount to “double taxation” is ridiculous.

Using this logic, the private health insurance rebate is not really a cost to the budget, since it is income in the hands of health funds that in turn pay tax to the government. Using the same logic, childcare should be made tax deductible, since childcare centres would earn higher profits, part of which would also be remitted back to the government via company tax (not to mention the extra income taxes paid by childcare workers). To do otherwise would amount to double-taxation, according to Sloan’s twisted logic.

On this point, Sloan also fails to acknowledge that the extra house price inflation caused by negative gearing also means home buyers have to take-out bigger loans and pay more loan interest which, while beneficial to the banks, limits their expenditure elsewhere in the economy, in turn crimping the profits (and tax paid) by other sectors.

Back to Sloan:

To eliminate or restrict negative gearing on residential property would lead to a massive dislocation in the property market. It would hurt renters and affect the incentive for developers to invest in new residential property.

Another classic straw man argument from Sloan. Again, most opponents argue that negative gearing should be quarantined for all assets/investments, not just housing, as was the case when the Hawke Government temporarily ‘abolished’ negative gearing between 1985 and 1987.

As for the claim that eliminating negative gearing would damage the rental market and dampen development, where is Sloan’s evidence?

What the data does show is that the last time negative gearing was abolished – between June 1985 and September 1987 – there was absolutely zero impact on rents (shown in red), with much higher rental growth experienced both before and after the policy change (charts at the individual state level are available here):

ScreenHunter_4318 Sep. 22 12.22

Reserve Bank of Australia data also clearly shows that the proportion of investors constructing new dwellings has fallen spectacularly since negative gearing was re-introduced in September 1987:

ScreenHunter_4316 Sep. 22 12.16

Again, only ill-informed and illogical commentary in this debate from Ms Sloan.

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Comments

  1. GunnamattaMEMBER

    Who is calling for this? The Fairfax dailies — whose diminishing number of readers without doubt own geared rental properties at a much higher rate than the population.

    As opposed to the millions being lost serving up tripe like this in the Rupertarian each day….

    Sloan’s argument that “the flip side of an investor taking a loan to buy an asset is a lender providing the loan” and that to disallow the cost of borrowing by investors would amount to “double taxation” is ridiculous.

    Is there a single Rupertarian hack that would hesitate to stoop to something ostensibly ridiculous?

    • That was gold, “this is not the precipitously declining circulation you’re looking for!” Ha ha ha

    • David WilsonMEMBER

      I was in real estate sales selling investment properties in Brisbane when Keating did away with negative gearing.
      Sales of investment property fell by 50% within two weeks, new developments in units often sold to investors stopped and rents went up due to the shortage of available rental properties and lack of new investment. — Keating realized that he killed off the building industry and dropped negative gearing two years later — this is fact so I don’t agree with Leith

      • Looks like someone agrees with me

        Finally the MSM also spots the bleeding obvious

        http://www.news.com.au/finance/real-estate/murray-inquiry-negative-gearing-in-the-firing-line-but-what-will-it-mean-for-house-prices/story-fncq3era-1227150976541

        “Matt Grudnoff, senior economist with the Australia Institute think tank, says negative gearing and capital gains tax concessions are pushing up residential house prices.
        “Negative gearing is a tax break that primarily benefits the wealthy,” he said. “Most houses are sold at auction, and about half there will be there to buy the house in order to rent it. Almost all of those would be for the purposes of negative gearing. Obviously with more people bidding, the price will go higher.”
        He says rising prices affect first home buyers the most. “They’re not in the market. If you’re already in the market and it goes up, the house you’re in goes up, so if you’re already in the stream, if you like, and can bid more,” he said.
        “The other reason is that a lot of investment properties are the kind first home buyers are looking for, houses that are a little older or smaller. They are targeted by investors who want to rent them out.”
        Mr Grudnoff says if negative gearing were removed altogether house prices would either come down or not increase for an extended period of time.
        “People have an aversion to selling a house for less than they bought it. What often happens is rather than the price collapsing, it just doesn’t increase for a period of time as the market catches up.”
        But an unwanted consequence of removing negative gearing entirely could be a slowing in construction.
        Ideally, Mr Grudnoff says, it would be limited to new houses and removed for second-hand dwellings.
        “Anything that increases supply in the housing market is a good thing,” he said.

        Checkout the comments. 235 in an hr. Didn’t take long for Tone to get a reaction to Sloan’s slop.

  2. I trouble understanding why anybody cares what Judith Sloan thinks.

    She’s an ideological hack who has never had a real job in her life. All her jobs have been more or less taxpayer subsidized. And unlike many public servants that actually do something productive, her contribution to society would be negligible.

    Her pieces are filled with strawman arguments, distorted recollections of history and massive exaggerations.

    • She is relevant because she is the economist mouthpiece for the position of the government. They can state their position at arms length through Sloan without obligation and gauge the public response.

      She is Abbott’s Kouk.

      They are flag flying. Let them know what you think.

      • I think it’s much more the case that Judith Sloan gets her political economy from the same masters as Abbott and the Coalition.
        One is a Journalistic sock puppet and the other a politcal one. The real opinions and power belong to a collective emergent behaviour of the FIRE sector and 1%.

    • Sloan also contributes to online LNP or right wing hangout ‘Catallaxy Files’ with some other academics, lots of economic theories, demands for less govt., less taxes (for their types, silence about NG) etc. etc.

      Like elsewhere they use the old conservative tactic of smearing or abusing personally anybody (via other commenters) who disagrees with their opinions, but on the other hand they seem to be to the left of NSW Labor on many social issues, which is not difficult…..

  3. Be careful what you wish for Mr Onselen.

    Remember that by your own reckoning Australian house prices are now much higher against all metrics than they were in 1985 when the last assault on negative gearing was made.

    The realpolitik danger here is that:

    1. negative gearing will be abolished;

    2. the housing bubble will collapse (as it might have done anyway); and

    3. that collapse will be blamed on the abolition of negative gearing, leading to a campaign for its re-introduction.

    If you really do believe that Australia is experiencing a housing bubble then the clever realpolitik strategy is to:

    1. wait for that bubble to collapse; and

    2. then blame the ensuing disaster on negative gearing.

    It’s all a question of timing.

    • GunnamattaMEMBER

      I must confess a large part of me wonders if the advent of MP now (right at the top of the investor blowoff) will have precisely that impact – and that another generation will grow up with the bullshido that removing negative gearing causes some form of societal pox.

      • The idea of MP is simple and should remain so, MP should locate risk where it belongs, nothing more of less.

        Borrowers not stumping up (eg) 30% LVR should have no recourse clauses should they wish to exercise them.

        Banks with some skin in the game is what has been missing.

    • “It’s all a question of timing.”

      I totally agree. Politically now isn’t the time. Sadly we need to wait for a “blood in the streets” event or for the broader population to actually start demanding change.

      Until then nothing will change on this front (the forces opposing change are just too strong).

    • Yup, negative gearing not happening, macroprudential is as good as wet lettuce leaf despite HnH and Lorax et al would like us to believe. New supply – ha, you must be joking. Tax reforms – you must be smoking. Anything else left in our kitties gents?

      Except of course the elephant in the room — emergency level rates. But no we cannot talk about that, because — economy!

      • Not picking on you HnH, I fully understand your intentions behind what you prescribe. I wish I could share your optimism on our economy, which now is changing from houses and hopes to houses and dopes. 🙁

      • There are various factors at play and it is like using that hammer to hit soft toys (you know that game at time zone and other amusement centres)

        Anyways, some talk of increasing supply, this would work is houses within a close proximity to decent schools and the CBD ( I live in Melbourne) were not sought after

        So take a suburb like Ashwood, Burwood, Mount Waverley.. drive down any street and you’ll see subdivisions taking place, fine, this increases supply.. but if anything it has made an old 3BR on a 700sqm block more valuable due to scarcity (fewer of these properties around) and now due to development potential (STCA of course).. prices up 30% in 18 months even with all this increased supply

        Others will say we need more higher density development, yeah this may distort the median as you flood a suburb with $450k dog boxes.. but does nothing to improve affordability for a 3br house

        Removing/Limiting NG will combat local buyers, however, in my area these are few and far between

        Removing the 50% CGT example can also take some heat out

        So ultimately, supply will continue to be an issue as buyers have a preference for the property they desire, in most cases the default is a home (not a unit or apartment)

        Removing NG will reduce demand from local buyers, good if you are looking to buy in Reservoir, little impact if you are looking to buy in Glen Waverley

        Same can be said with CGT exemptions

        The path has been set by allowing high numbers of cashed up foreigners to relocate (migrate) or invest in existing housing even though they haven’t set foot here

    • The problem here is that if there is blood in the streets and the shizzle hits the fizzle, the 2B a year of negative gearing costs to the budget will be the least of our worries.

      All that to say it’ll be a lonnnng time till we can revisit.

      I say seize the day.

      If there’s a collapse and all those shut out of the capital city markets currently, who have cash, are ready to step up to the plate and buy….well, they won’t be complaining. (All things being equal and assuming they still have jobs/can service debt/there’s credit available)

  4. “Let’s get something straight. What most opponents of negative gearing are seeking is the quarantining of negative gearing losses on all assets “

    Yes that’s certainly the Saul Eslake view and your view, but there is a huge amount of misinformation out there. Many even believe that withdrawing NG will stop investors claiming interest and costs completely.

    I think that it’s the level of misinformation that Sloan is directing her OP at.

    • Peter, mate, why don’t you write a thoughtful and comprehensive argument on why you think Leith is wrong, instead of your usual obfuscations and strawmen filled comments. Perhaps people may take you seriously then.

      • Piss off Peter Fraser. Write a comprehensive argument of what you think is right and wrong about negative gearing and suggested changes to it, and you may perhaps gain my respect. Till then, you are just an astrotufer merchant of debt.

        • GunnamattaMEMBER

          Peter loves some obfuscation………..

          These Qs were posed to him some time ago. Generally Peter’s line is that nothing can be done that will in any way diminish the desirability of speculating in real estate, and that if anything might conceivably be done then it will be the longest most difficult option conceivable, with a view to implying that the situation we currently have is the best of all possible worlds…

          Do you think Australian residential real estate prices are in a bubble?

          What do you propose as measures to improve Australian housing affordability?

          Over what timeframe do you think this affordability could be improved?

          Do you think that renting is more expensive or cheaper than buying where a large mortgage is involved?

          Do you agree/disagree that the concessions for Australian real estate – Negative gearing, capital gains tax concessions in particular – are an effective use of Australian tax policy. Do you believe they help promote development of a better economy?

          Do you agree/disagree that the concessions for Australian real estate disproportionately benefit older Australians with more assets?

          What would you advise people thinking about buying now to do? take as big a loan as they think they can reasonably afford and plough it into a house, or save up?

          Would you agree if they bought now they would be paying off someone elses speculative position?

          In what context would you advise people against buying now?

          Do you think not addressing Australia’s real estate costs is a factor in Australia’s economic competitive position?

          Do you think lowering interest rates to prompt an expansion of aggregate demand will expand aggregate demand by more or less than it rewards those with a position speculating on rising asset prices?

          Do you think the Foreign Investment Review Board adequately monitors applications made by foreign nationals to buy existing Australian residential real estate?

          Do you think Austrac adequately monitors funds originating offshore coming into Australia to ensure the traceable probity and provenance of those funds?

      • Peter, can you answer Gunna’s questions?

        I always read your responses vis-a-vis that removing/quarantining NG will have negligible tax impact, but I am very interested in any alternatives you might offer?

        Starting with the assertion/basis (even if you don’t agree with it) that
        a) Oz property on many metrics is overpriced
        b) FHBs can’t get into the market
        c) There are tax incentives in the system available to investors that are not available in other places in the world (apart from NZ)

      • Fraser has answered all of that before marshy, here, I can even provide @peterfraserbris’s responses:

        i) Australian RE is not one market, some areas will see very low growth, probably you don’t want to buy there.

        ii) FHB’s have plenty of unloved locations they can sink their teeth into — just get on the property ladder and you’ll see!!

        iii) Preferential tax treatment is not the motivation for serious investors, their removal will not materially alter the landscape, but will crowd out available rental space….

        How’d I do Fraser?

      • I always read your responses vis-a-vis that removing/quarantining NG will have negligible tax impact, […]

        Note that Peter’s response is based on the premise that either a) property prices will continue to rise forever; or b) even if they don’t, investors can afford to hold their negatively geared property indefinitely, regardless of circumstances.

        Ie: his argument is basically that there’s going to be negligible tax impact because hardly any investors will ever exit the market with a net loss, no matter what.

      • I’m sure Peter, through his work, has seen first hand that Life has a way of throwing things at us, over and above interest rate/taxation changes, that don’t always allow for the best intending debtors to ‘stay put’ and just keep paying off the mortgage. It’s harder to do with half-of-half left, or no job, or an unexpected illness or boomerang children etc. And those things tend to become magnified when things go bad….

      • To be fair,

        While PF does paint a negative picture of the merits of various demand side policies he is pretty consistent in noting that the fundamental driver of the current situation is the lack of low cost raw land to new home buyers.

        What I call the “first user pays all” approach he describes more simply as government tax.

        While we can debate what to call each of the costs that contribute to the inflated cost of raw land – whether a developer doing what the regs require (gold plated roads, sewers) or paying developer contributions or the land banker/gouger in chief – state and local governments – simply maximising profits by drip feeding supply (Price check the ACT land authority for a champ at this) the fact remains that raw land costs a bomb and that has little to do with demand policies.

        Sure PF does display over affection for nanny state town planning control freakery, which a cynic might suggest is less about ensuring that steel works are not located next to kindergartens and due more to an appreciation that the town planning red tape fest helps compound the largely government led gouge fest on new land.

        But PF is hardly alone in thinking up excuses on why restrictions and regulations on new supply should not be relaxed.

        Half the time most of the regularly commenters (you know who you are) on MB are getting worked up on why young families should be prevented from buying cheap land and paying a builder to build the house they can afford without becoming a debt slave for life.

        Instead they advise that those young families should just suck up the low rental vacancies and high rents and wait for the Bedroom Liberation Army to free up all the ‘hidden’ supply.

        So while PF does apply a frosting of gilt to some housing lilies – like the benefits of policies that reduce demand and the benefits of reducing costs and restrictions on new supply, he is a pretty mild mischief maker.

        As for demand policies it is always worth remembering that action on demand is extremely difficult politically because whoever takes action will have their finger prints all over the consequences.

        Not saying don’t try to get action on demand but it would be nice if a few more people who get riled up about the housing situation were a bit more realistic and realised that the best approach politically is to reduce the cost and restrictions on new supply and if that is not fast enough slow migration at the same time.

        If houses prices drift downwards because of new low cost supply generated by an efficient supply pipeline it is much harder to specifically finger a polly or public servant opposed to a general whinge.

        One thing worth keep in mind, even if house prices do fall there will still be mortgages and mortgage brokers – perhaps broking smaller mortgages but mortgages all the same.

        Plus if we get some decent land policies we should have lots of housing construction lots of young buyers and lots of new though hopefully smaller mortgages.

        But I am not that hopeful considering the way so many think the best bit about MP is that it will allow the RBA to cut interest rates further.

        Good Grief Charlie Brown.

      • Go for it Peter, have a bash at answering Gunna’s questions — I for one be interested in his answers.

      • “While PF does paint a negative picture of the merits of various demand side policies he is pretty consistent in noting that the fundamental driver of the current situation is the lack of low cost raw land to new home buyers”.

        Yeah, funny about that…

      • It certainly is entertaining watching people make up narratives for me.

        If I’ve misunderstood your insistence that even without NG all losses will simply be carried forward and eventually offset against either rental income or capital gain, by all means correct me.

      • drsmithy – not every cent, but yes most. As I understand the tax model if NG was quarantined then any losses are simply carried forward and applied against future profits, even if that happens to be a different property purchased at a later date. Each property isn’t quarantined.individually.

        In that model it’s hard to see how a serious investor couldn’t modify his/her behaviour to accommodate that change and ensure that all deductions are eventually claimed.

        However if you have solid evidence to the contrary then I would like to hear it.

      • You crack me up Fraser:

        watching people make up narratives for me.

        iii) Preferential tax treatment is not the motivation for serious investors, their removal will not materially alter the landscape, but will crowd out available rental space….

        In that model it’s hard to see how a serious investor couldn’t modify his/her behaviour to accommodate that change and ensure that all deductions are eventually claimed

      • In that model it’s hard to see how a serious investor couldn’t modify his/her behaviour to accommodate that change and ensure that all deductions are eventually claimed.

        Right, then, so my original statement was correct. Your assumption is that investors will not exit the market with a negative loss because a) prices won’t reduce and/or b) negatively geared investors can hold indefinitely.

      • drsmithy – you are making up strawman arguments. I was discussing the tax implications, it’s you who reached that observation.

        My point was always that the removal of NG won’t make as much difference as many think, I have never said it won’t make any difference. Please don’t try to write my narrative for me.

      • drsmithy – you are making up strawman arguments. I was discussing the tax implications, it’s you who reached that observation.

        So what are the tax implications of investors having to sell having never turned a profit (CG or otherwise) ?

      • In that case the tax outcome would be that most of the claims would already have been offset against rental earned, but if there were loss forwards then those loss forwards would either be lost or used up when and if that investor bought another investment property, and then the loss forwards would be claimed against any profits made on the new property, as would any capital loss on sale.

        It’s important to understand that investors are not as highly leveraged in aggregate (within their portfolio) as say FTB’s who use high LVR products. Therefore they are usually not relying on NG to a great degree in times of low interest rates. That would change if high interest rates returned.

    • General Disarray

      Many even believe that withdrawing NG will stop investors claiming interest and costs completely.

      What article have you read that said that? Can you provide some links?

    • I think that it’s the level of misinformation that Sloan is directing her OP at.

      Pretty sure most of that misinformation has been generated by her and her ilk.

  5. Hill Billy 55MEMBER

    As a taxpayer I used to support the rental housing associations funded by the government to assist low income workers and welfare recipients afford housing.

    Since seeing the impact of this on increasing the minimum rentals charged, I realise that this subsidising of rents merely enhances the value of the properties rather than giving a real benefit to the said tenants. Without the subsides, they would be able to afford less rent, the minimum house price would be less, and so the ponzi would have the first leg it stand on knocked out.

    Is this a reasonable statement of facts?

    Should the government subsidize these housing associations? Whilst their stated objects are to help the poor, their modus operandi is to protect the assets of the landlord.

    Genuine questions and interested in people’s thoughts.

    • Credit Hill Billy, its an unregulated tsunami that washes all away before it, the greatest subsidy has been the crashing of interest rates for 30 years.

    • Absolutely YES they should.

      My view is based on my experience as a tenant. I’m a high income earner by any objective measure yet I choose to rent.

      Early this year I was temporarily homeless. I had been applying for rental houses for 4 months and kept getting knocked back despite having a perfect history of 9 years at the same address, a written reference from the property manager, and offering 2+ months rent paid in advance on top of the bond.

      So I would say when you have this level of difficulty in securing accomodation I shudder to think how difficult it must be for those on low incomes, without secure employment, who may not present well in person or on paper.

      Every housing association that exists to assist those who seek shelter deserves to be funded.

      Your assertion that “Without the subsides, they would be able to afford less rent, the minimum house price would be less, and so the ponzi would have the first leg it stand on knocked out.” doesn’t pass the sniff test.

      Simply put, without the subsidies and assistance provided (like navigating the application process and getting bond together) these people would be homeless.

      The rental “market” is dysfunctional. There is no market clearing mechanism when a proprty can sit vacant because a beligerent investor can stick to their price safe in the knowledge that they take a rental loss today for a capital gain tomorrow.

      • Aaron,

        Something about what you wrote doesn’t pass the sniff test!

        Same address for 9 yrs, high income earner and you couldn’t secure rental accomm? Where was this?

        I’ve moved three times in six yrs and no problem, the last three being a very low vacancy rate period.

      • @Dennis – True story in more detail if you like:

        Moved into a place in early 2005 (Thornbury 7km from city 700m2 block 3BR Edwardian house). Was told the owner would be selling soon and I indicated interest in buying should it come to market. Year after year it was revalued higher but the owner always wanted $100k over realistic market valuation (delusional elderly immigrant). In my 9 years there she took it to auction and twice withdrew it before auction day much to the annoyance of the RE agent.

        Our rent as at departure in Feb 2014 was $1780 pcm. But by then the place was a total dump as zero was spent on upkeep. It sold for $975k. New owners flip-flopped on keeping us there and spun a yarn about moving in to do rennos for their “dream home”. Subsequently we left and they put it back on the rental market the week I left after a coat of paint.

        We (my male housemate and I) had been putting in applications for similar properties at obviously much higher rents to no avail. I would turn up to opens well dressed straight from work with completed applications, ID, bank statements and an earnest desire to sign up – and still not land anything.

        In the end we added a female friend to the applications and faked a relationship. We got the first place we applied for after doing that. We now have a 5BR Art Deco weatherboard fully rennovated/modernised 2 storey on a 600m2 block in Coburg 8km from the city and pay $2520pcm.

        Do the math on current valuations for Thornbury and Coburg and tell me if I’m better off paying 1/3rd of $2520 (its $840pcm) in rent than paying a mortgage and upkeep…..

      • Aaron,

        When you got to the “my male housemate” I started to see a possible “issue”, which was confirmed by the female friend finishing the issue.

        My doubt was on the difficulty in getting rental accomm., but your difficulty was because dumb, stupid ignorance abounds out there, as unfortunate as this is, but it wasn’t because of the market! I don’t know if your gay or not, it doesn’t really matter, but if I was a landlord I’d give a gay man the run over straight any day. It’s almost no brainer who’ll look after the place better.

        You’ll get no argument from me about the merits of renting Vs buying with things as they are. Like a number here I could buy at the median price with no loan, but I see a huge risk at my age of my equity shrinking sizeably. So I’ll wait, I’m patience.

    • I do not believe rental assistance for low income should be abolished, Below is a link to the current payment amount.

      http://www.humanservices.gov.au/customer/services/centrelink/rent-assistance

      Note that the payments are per fortnight. For a single person on benefits, it’s a $40 subsidy on a rent of $120 a week in shared accommodation. This is at the very low end of the market : converted warehouse, shipping containers, etc in the middle of nowhere.

      The low income rental subsidy for those who are employed is.. $300 a year!! (< $6 a week!!)

      In contrast, the typical 'investor' loses 12K a year. Using a a tax rate of 39%, that is around $90 a week which the government subsiding the 'investor' through negative gearing.

      • GunnamattaMEMBER

        Precisely why when I hear babyboomers going on about welfare recipients and dole bludgers I usually slip in a reference to tax concession bludgers and negative gearing bludgers as being an even bigger issue

  6. All you need to know about Sloan is captured in this risible contortion of logic…

    To eliminate negative gearing would be to introduce double taxation. The flip side of an investor taking a loan to buy an asset is a lender providing the loan. And that lender pays taxation on the associated profit.

    It sounds like something she politely scribbled onto a whiteboard during a workshop with the IPA’s Youth Alliance, and agreed to put into her article to encourage their lateral thinking.

  7. Judith Sloan has never had an original economic idea ever. It’s pretty clear she’s been trotted out to broadcast the party line. That’s why she didn’t say anything about Murray at all, because to do so would increase the credibility of his findings and ruin hers. That she is called a Professor is a sore indictment of the discipline, and academia as a whole.

    Wonder how many negatively geared properties she owns?

    • “Judith Sloan has never had an original economic idea ever.”

      I disagree. I’m pretty sure the “double taxation” bullsh1t quoted above has never been considered by anyone else. Of course there’s a damn good reason for that.

  8. How about this as alternative to removing NG? Keep NG as it currently is but remove the CGT discount. This would drastically reduce the benefits of NG and the incentive to do so.

    Higher CGTs could then be used to fund lower income taxes. This has the advantage of improving the returns from working for your income rather than speculating in the property market.

  9. Here’s an idea, how about we keep negative gearing and get rid of Judith Sloan. Be worth it not having to be subjected to this bullshit. I don’t read her shit any more but her mere existence coupled with the fact that people think this is credible analysis makes me nauseous.

  10. Leith, I think you have mischaracterised the childcare example. The reason childcare is not tax deductible is because it is treated as a personal or domestic expense under tax law instead of as an income-earning expense. The same goes for me buying a TV or a home plumbing repair. These expenses are classed as of a personal rather than business nature. Now it may be wrong or unfair to treat childcare costs in this way, but that is a long-standing policy decision.

    The point is that if childcare expenses were treated as ‘expenses incurred for the purposes of earning accessible income’, then they would be fully deductible against total income, even if childcare costs exceeded the income earned during the time someone was able to work by placing her/his child in childcare. So for example, if someone earned $200 a day, $100 during kindergarten hours and $100 after hours when childcare was needed, but childcare cost $150 per day, the taxpayer’s taxable income would be only $50. The childcare expenses would not be ‘quarantined’ to bet set only against income earned after hours.

    For this reason, I think Sloan (and previously Ergas) have made a reasonable point about symmetric tax treatment.

      • It’s not semantics. If anything, relying on a quirk of tax law (the non-deductibility of childcare expenses) to justify rejection of an argument smacks of semantics to me. Better for you and Leith to say that there is an asymmetry, but you don’t care. You would certainly look less foolish.

        • Can I fully deduct work-related education expenses? No. Can I deduct travel expenses to/from work? No. Can I deduct childcare expenses (which enable me or my partner to work)? No.

          There are all kinds of limitations on work-related tax deductions. But none on negative gearing. Funny that.

  11. Don’t know why she is railing against Fairfax, they are her allies in ever increasing price rises and negative gearing cheer squad.

  12. The minute anyone starts with the “leftie” crap, all I hear or read is “blah, blah, blah”

    Their IQ drops to about 75 in my estimation and I tune out because it’s going to be the same tired, boring right wing schtick from a die hard Liberal voter.

    • Yup, the extremist Liberal loon pond think anyone who disagrees with them is a ‘lefty’.

      This extreme tribalism and inability to compromise will result in their party eating itself. If Labor pull it together, the Libs will be sitting in opposition for years arguing over who is the most ideologically pure…

      … unless of course they roll these loons out of all positions of power in the party.

      I actually feel the latter is likely in the next few years.

    • “The minute anyone starts with the “leftie” crap, all I hear or read is “blah, blah, blah””

      Even better is “leftist”.

  13. I actually used to respect some of Judith Sloans analysis on certain issues, but this is woeful.

    It’s so bad, she should go back to school to learn a fundamental tenant of economics, that of not only describing the ‘seen’, but also the ‘unseen’ effect of a policy.
    She has fundamentally failed in this regard.