Hockey’s last: Negative gearing’s gotta go

From Joe Hockey’s parting address just now:

Mr Speaker, our taxation system needs reform for the 21st century economy, integrity is crucial for that and through our leadership of the G20 we hardened the resolve of major economies to address base erosion and profit shifting.

Integrity is hugely important but the best way to get compliance is to have lower, simpler taxes. We abolished seven taxes and fixed 96 tax problems but reform had to go further and through a comprehensive review of the tax system.

I endeavoured, and failed, to keep all options on the table.

We must increase and over time broaden the GST, we must lower all income tax those people and companies are given more incentive to take risks and receive rewards.

As a minimum, we should aim for a 40-20-20 rule. 40% top personal tax rate at a much higher threshold, 20% tax rate for most taxpayers and 20% tax rate for businesses.

We should be wiser and more consistent on tax concessions to help pay for that, in particular tax concessions on superannuation should be carefully pared back.

In that framework, negative gearing should be skewed towards new housing so that there is an incentive to add to the housing stock rather than an incentive to speculate on existing property and we should never ever forget small business.

Then some guff:

Mr Speaker, the Abbott government was good at policy but struggled with politics. When faced with a choice, I would always prefer to do what was right than what was popular.

I admit that we could have done more to win over third-party endorsements and to win over the Senate. And we could have done more to win over the Australian people. We tried to achieve a lot in a short period of time and whilst we were dealing with significant domestic policy challenges in health, welfare and education, we underestimated the massive time requirements associated with national security and chairing the G20.

Nothing illustrated this better than the 2014 budget, where the government had more courage than the parliament. As my good mate, the outstanding minister for finance, Senator Mathias Cormann, will tell you, it is easier to spend money than to save money. Unfortunately, in modern politics it’s far easier to demolish good policy proposals than to build and implement them.

As I’ve said recently, Hockey is a gas bag and can’t dodge his fair share of blame for the Government’s failure but he had a much better grasp of what was required for the Australian economy than did his disastrous boss.

Even so, Joe Hockey spent the last year defending negative gearing and lying about it here, here, here, here, here, here, here and here, to name just a few!

Comments

  1. Either Jo simply did not have the ticker for the Job or something happened to him shortly after the election. Given the look in his eyes I think history may well record something big went down privately not unlike when Bob Hawke started floundering and Keating bumped him off when his kid was on drugs.

    • LOL! that was exactly my thought. Joe got rolled so he’s now thrown an economic grenade at Turnbulls government. Lets how good Malcom is at juggling it.

      No pollie want to be the sucker who changes superannuation entitlements or touches negetive gearing. Its political suicide, but Joe’s forcing them to look at it.

      This is going to be fun!

      • It isn’t political suicide if you grandfather arrangements r.e Negative Gearing.
        Changes to super tax concessions are not political suicide either. Tough, but not suicide.

        That sort of thinking is how we ended up with Tony Abbott no change, no reform, backwardness. There is now an appetite for change in the community which wasn’t there in 2013.

  2. Joe had the job of selling Abbott’s backwards political strategy.
    It is all said and done now and I’m really glad that Joe was able to air his personal views on negative gearing.
    That he defended existing arrangements while Treasurer reflects Abbott’s leadership and not what Joe thought personally.
    Hopefully this will represent another step forward in reforming what is a deeply regressive/socially damaging/economically damaging set of arrangements.

  3. ” 40% top personal tax rate at a much higher threshold”

    How high is high? How many people does he think have PAYG incomes of $180k?

    “We must increase and over time broaden the GST,”

    Why? It’s a 1970’s solution. it is in effect an inverse tariff, it should be repealed if anything.

    “we must lower all income tax those people and companies are given more incentive to take risks and receive rewards”

    Companies forming for the sake of forming, or trading for the sake of trading, are not a virtues.

    The real risk is the life-altering, socialisation-crushing, mortgaged to the hilt effort to bring something new or innovative to the market.

    Other than some slightly high margins to fund parasites like boomers and feminists, the incentives and/or disincentives aren’t really in the tax paid.

    maybe the complexity….

    Where the incentives need to be, and where the disincentives are, is in barriers to entry.

    * Hideously expensive land, and the concomitant wage demands.

    * Overtly protective unfair dismissal laws (please SJW’s. don’t take the illogical extreme mirror).

    * Utilities either obsolete (communications) or the cost of continuing to raise well above CPI.

    Australian workers are generally productive, unless you can’t get rid of them when they’re a poor fit. They may need to be paid more, but they deliver more, and they are more reliable customers with their incomes (barring the mortgage-mug insanity).

    They are educated and healthy because of the income tax they pay.

    This is not stopping business.

    Me, thinking I can do better by myself than my current employer, needing to draw client revenue of $220k in the first year before I make a single cent for myself is my disincentive, not 8% marginal tax on everything above PAYG of $180k

    • not very many because rich know how to minimise income before getting taxed
      problem is that someone making just twice the average pays almost the same rate as someone making 1000 times more

    • Six month probation periods are now the norm.

      If you can’t figure out in six months whether or not someone is a “good fit”, you’re probably going to have trouble running a business with employees.

      • or..

        if serious reform occurs in your business process and the person proves to be utterly incapable of adapting.

        or…

        once the probation period expire, they regress in performance.

      • Extending that logic to its conclusion, in the event that there is a change in government, there should automatically be a confirmatory plebiscite (single question ballot – keep going or hold a general election) six months after.

        Howard would have stayed, I reckon, and I think Rudd, but this most recent lot…

      • if serious reform occurs in your business process and the person proves to be utterly incapable of adapting.

        You mean, like, become redundant ?

        once the probation period expire, they regress in performance.

        You mean, like, be dismissed for poor performance ?

        Amazing how nobody ever thought of those possibilities until now !

      • Extending that logic to its conclusion, in the event that there is a change in government, there should automatically be a confirmatory plebiscite (single question ballot – keep going or hold a general election) six months after.

        Not quite sure I follow you. A change of Government requires an election…

      • Not hard – if a new government isn’t performing after six months hold another election, don’t wait three years – based on a simple yes/ no plebiscite held at the six month mark (i.e. the plebiscite gives the electorate the option to have an early election if they have a major case of buyer’s regret).

      • Ah, OK, I misunderstood what you meant the first time.

        It’s an interesting idea, but the problem is sometimes unpopular things need to be done, so that would potentially be very counter-productive.

        Recall elections are probably a better way of doing it, since they require pro-active citizen action and they occur on an individual representative basis, rather than the whole Government at once.

  4. Nope, political capital was spent on frivolous policies. Remember that medical research fund?

    Coming into power and telling the AU people all is well, but in reality it is not, makes you look like a fool when your policies/estimates do not come to fruition. Then again, are the australian people ready to hear the truth? My bet is that those focus groups have told them we are not.

    • It represented a backwards political strategy crafted by the PMO.
      The story of the Abbott government was of a command and control PMO run by Credlin.
      In the end Joe wasn’t able to stand up for his personal views. I guess that reflects poorly on him but he was just one piece of a hugely dysfunctional government under Abbott.
      We should all be thankful that Abbott is gone.
      I see Joe as collateral damage. He was never the core problem.

    • Yep, Abbott burned that capital on ideological rants rather than genuine reform. And for this he has my gratitude.

  5. That was an interesting comment on NG. I wonder if that was where the White Paper process was heading (no mention of limiting it for shares and other investments I note).

    Either way, he’s surely given a massive heads up to the industries who want to keep it. No doubt they will be in Morrison’s office early tomorrow morning.

  6. Really shreds the last of his credibility that he uses his last speech to articulate that view. All politics and votes for the last 2 years.

  7. Goodbye Joe. Your End the Age of Entitlement Speech in London, one of your finest moments. Big pity most of the media in Oz was not on board. And yes, you are right, there will need to be some contributory element to health and education, welfare efficiencies maximised and continued drive to pare down debt.

    Ahead of your time! Enjoy a fine whiskey and a good cigar in your mahogany panelled study on Massachusetts Ave.

    • I am sure that Joe will enjoy leaning on that mahogany panel, paid for by the taxpayer.

      I hope that the media will cease their neglect and provide occasional images of him leaning on those panels and drinking fine scotch at our expense, preferably while delivering a lecture on how the rest of us need to do some lifting.
      Fox News, or its stable mate, the Australian could do it with a straight face, I’m certain.

    • Big pity most of the media in Oz was not on board.

      The majority of voters weren’t on board with a budget that expected the poor and vulnerable to shoulder the burden through cuts to services and the middle class to happily fall in love with a decade of bracket creep while the wealthy got away with barely a scratch.

      Blaming the media. Loon Pond tactic #1 of late.

      • Abbott and his supporters just don’t get that they sealed their fate while in Opposition!

        Abbott promised: “A government that says what it means, and means what it says. A government of no surprises and no excuses.” They made honesty (and no big surprises) a core election issue. They probably could have got away with breaking a few promises here and there, but these were big surprises. They did little ground work and arrogantly thought voters would fall in line because they were an adult government. Abbott and co can blame the media if they want, but that budget was dead on arrival.

      • Agree 100% with Rob W. I would suggest that they also rather cynically and too obviously thought they would hand down their dishonest and completely unexpected (by the public) first budget and then have 2 years for everyone to forget it while throwing a few sweeteners into a last budget before calling an election.

    • 3d1k… “Age of Entitlement” – ??????

      Gezz… your stripe can do anything without rewriting history or inventing new meanings for English syntax, if anything, the largess is on the upper bound of the social strata.

      Skippy…. Tony and mob failed because they were seen in actuality, sock puppets for their feudal lords, Murdock et al…

      • Funny stuff 3d1k….

        “Hockey arrived on August 2, 1965, seven years after his sister Juanita, (b 1958). He also has two older brothers, Colin, (b 1953), and Michael, (b1951).

        Richard Hockey later switched from the deli business to real estate.

        Early on he was a Labor Party foot-soldier. Richard’s new wife hailed from a family dominated by a very strong, single-parent matriarch. Joe’s great-grandmother was one of the largest landowners in North Sydney, and traded shares into her eighties. They were centre-right stalwarts. joesGGGmother

        Samatha Maiden reported, incorrectly, in the Telegraph, “Hockey likes to brag his grandmother was something of a 1920s share-trading shark who was so sharp that family folklore suggests her bank sent out messengers to her house every two weeks to pick up her dividend cheques for deposit.” Hockey’s Great Grandmother was Rebecca Martin who built her fortune on the stockmarket in the 1930s. Rebecca, daughter of John and Selena died in Chatswood in 1955.

        It was the financial hardships of the 1970s that united the Hockey household behind the Liberal Party. The credit crunch in 1974 brought Richard’s prosperous property business to its knees, and he blamed Gough Whitlam for the economic environment.

        Joseph Benedict Hockey was born August 2, 1965 in North Sydney, Sydney. While John Winston Howard shares a middle name with the Butcher of Gallipoli, Joe shares names with Australia’s great Labor leader, Joseph Benedict “Ben” Chifley. Brought up in an ALP household, the Whitlam years saw a change in the family fortunes. By the age of ten he was earning his keep sweeping the shopfront stairs of the suddenly struggling family real estate business while his (unlicensed) brothers drove customers to visit sites.
        1970’s & 80’s

        UNIVERSITY
        Student Joe Hockey addresses the media in 1987, protesting against a new uni fee. (theage.com.au)

        Student Joe Hockey addresses the media in 1987, protesting against a new uni fee.
        (theage.com.au)

        The family quickly developed an anti-Labor attitude and with their earned and inherited wealth, Hockey attended St Aloysius’ College, Milson’s Point and the University of Sydney, residing at St John’s College. While at university he was President of the University of Sydney Students’ Representative Council, and assisted in inviting Pope John Paul II to visit the University of Sydney during the 1986 Australian papal visit.

        His University years held moments of legend. He smoked marijuana and turned up drunk to his first lecture. There is a story that he won the University Council election by placing free kegs of beer next to the ballot boxes outside the Residential Colleges. University friends include Football Federation Australia’s David Gallop and indigenous leader Noel Pearson.

        WORKING FOR A LIVING

        Graduating with a Bachelor of Arts and a Bachelor of Laws, Hockey worked as a banking and finance lawyer at the century-old law firm, Corrs, Chambers, Westgarth.where he worked on the privatisations of the State Bank of NSW and the Government Insurance Office. With Greg Medcraft he also worked on the securitisation of David Jones Credit Card business. Those of us who looked at the root causes of the GFC in 2008, securitisation was one and Joe Hockey was an early facilitator.

        As with so many politicians today, Joe has no experience with what most of us call “The Real World”. His adult working life was the view from a Lawyer’s office.

        Late in the 1980’s he stuck a toe into the political world as the Director of Policy to Nick Greiner, Premier of New South Wales.” – read on…

        https://archiearchive.wordpress.com/who-is-joe-hockey/

        Skip here…. the last bit of his London gig is a hoot – !!!!!!!!!

        “Adam Smith’s free hand is perfectly capable of forming a fist to punish nations who ignore the fundamental rules. Unfortunately I think Adam’s down at the gym right now and in training for one almighty whack.

        Restoring fiscal credibility will be hard. But it is essential we learn to live within our means.
        The Age of Entitlement should never have been allowed to become a fiscal nightmare. But now that it has, Governments around the world must reign in their excesses and learn to live within their means. All of our futures depend on it.”

        Skippy…. Free Hands… Chortle…

      • Thanks for the Hockey bio. All lives are interesting in their own way. Except for Greens.

        Whilst I enjoyed the read, I failed to get the gist of the point you are making. My error, I’m sure.

      • The guy is a pathological opportunist with out a modicum of ethical bearing and detached from reality… like you…

  8. CCI (Crashnik Confidence Index) went up a notch. Stands now at 55.

    50: stagnation, 100: bust, 0: BOOM!

  9. How pathetic dodging the questions on negative gearing dozens of times (and bringing the argument of higher rents) and now that he’s out of office admits that negative gearing needs to skewed to new housing. Was that too hard for him to say when he was in office??

  10. And potential leader would have held his line against Abbott.

    Joe didn’t.

    P!ss weak, deserves no sympathy.

    Could EASILY have gone to the back bench like Turnbull did.

    What a waste, and poor judgement.

    Ergo not worthy of the 2-years-ago-leader-in-waiting.

  11. But I have spoke
    With one that saw him die: who did report
    That very frankly he confess’d his treasons,
    Implored your highness’ pardon and set forth
    A deep repentance: nothing in his life
    Became him like the leaving it; he died
    As one that had been studied in his death
    To throw away the dearest thing he owed,
    As ’twere a careless trifle.

  12. All this does is confirm the only reason he got the job was because he is a vacuous mouth piece who was complaint and did the bidding of the right wing when he was told to in return for the position.
    Unacceptable.

  13. FiftiesFibroShack

    That speech was a shocker. Shame he couldn’t leave the petulant child act behind and leave with some class.

  14. Skewing Negative Gearing towards New Builds does what? Ensures that anyone buying a new property for rental does so at an effective premium! Because the second that they try to sell it on, it will be discounted by the amount of NG benefit that won’t pass to the second and subsequent buyers. Negative Gearing? Scrap it entirely! Allow Neutral Gearing ( offset any costs against income derived solely from within the same property/asset class and only allow quarantining of such costs for, say, 5 years) but get rid of the Negative bit.
    Capital Gains Tax? Make it Nominal not Real – get rid of the CPI adjustments. If you’ve improved your property by renovating it, you get your return on the after-tax bit as your reward, just like you do when you have a proper job. If your property increase in value over time; good on you! But you pay CG Tax on the difference between Purchase Price and Resolution Price. Why? Because it’s income. Hence the best of all Worlds is – stable property prices; realistic rental income ( that should be more than the cost of ownership!) and a fairer tax system.

    • Skewing Negative Gearing towards New Builds does what?

      Creates a market for dishonest architects or similar professionals who are willing to put their name to documents which declare existing buildings uninhabitable when they are not and to documents which declare said uninhabitable dwellings are newly inhabitable after a lick of paint has been applied or the unsightly orange tiles in the kitchen have been replaced.

      • “New Dwelling
        A dwelling that has not been previously sold by the developer and has not been previously occupied (such as, by tenants) for more than 12 months.
        New dwellings include those that are part of extensively refurbished buildings where the building’s use has undergone a change from non-residential (for example, office or warehouse) to residential. It does not include established residential real estate that has been refurbished or renovated.”

      • From elsewhere on the webiste you copied that definition from:

        “A redevelopment proposal is normally approved where it can be shown that the existing dwelling is
        at the end of its economic life (that is, derelict or uninhabitable) and will be replaced by a new
        dwelling. ”
        also
        “To demonstrate that the dwelling is derelict or uninhabitable, a valuation of the existing
        structure(s) by a licensed valuer and/or a builder’s report is required.”

        Note : one valuation only. Obvious game is to falsify ‘derelict’. – and unless they send someone to check (!), the ‘refurbished’ versus ‘rebuilt’ aspect is also down to a note from your preferred architect/ builder. (and if they rebuild a house with similar number of bedrooms, its a bit moot anyway)

    • I don’t see that as a problem. Existing property prices are known based on frequent transactions, so investors can compare the price of a new-build versus similar existing properties. So the difference in price between new and old should be no more than the present value of the benefit from negative gearing, and in reality, it should be less than that.

      The fact that there is an incentive to buy the new property over the old will encourage new supply, and remove the tax lurk on existing property.

      That’s two good outcomes for society.

      • “the difference in price between new and old should be no more than the present value of the benefit from negative gearing” Precisely! And when that New Build is sold on, what would you as the next buyer pay? What the First Buyer was encouraged to pay, tax incentives and all, or a discounted price to account for the fact that you get no such incentive? Me, I’d be discounting the price to a present market economic return, and if a flat nominal CG Tax is added into the mix – probably a whole lot less than that!
        (NB: Let’s remember that NG encourages ‘investors’ to pay more than owner/occupiers already. If that effective tax discount is removed from secondary sale, likely the tax discount will turn into a premium, dropping the price of property across the board until such time as the risk premium of having a true investment is reinstated – say 7% net margin over the gross costs of owning the investment)

  15. Wish Jo well for the future. But vigorously dispute the Abbott government was good at policy. Its economic policy, not necessarily any person, was cruel, inequitable and uninspired. Budget 2014 will live on in its infamy.

    Three number slogans, like 40-20-20, are facile. What public investments we need for a productive, secure and decent society is a far better starting point.

      • “I’ve heard it suggested that 36-24-36 is the ideal.”

        Suggested? biology backs it. The number looks at 1.5 to 1.7 ratio of hips to waist (0.58 to 0.66 inverse)

        http://www.ncbi.nlm.nih.gov/pmc/articles/PMC4050298/
        http://beheco.oxfordjournals.org/content/early/2013/03/13/beheco.art016.full

        A biological hardwired preference, even women have a preference of this ratio…

        I reckon ideal would be 1.618….. it’s called the natural ratio for a reason and it’s found throughout nature.

        So it is ideal, yes…. when you see all those facebook memes suggesting “dogs eat bones, real men prefer curves”… but you feel physical nauseous when looking at some 30+ BMI tumblrina … there’s nothing wrong with you, you’re the way nature intended.

        It’s the lard fetishists that have something to answer for.

      • Bon Scott is very disappointed in both of you.

        “42-39-56 – you could say she’s got it all”

        … to say nothing of Sir MIx-A-Lot

        “I’ve heard it suggested that 36-24-36 is the ideal.”
        Hah! Only if she’s 5’3″

      • So it is ideal, yes…. when you see all those facebook memes suggesting “dogs eat bones, real men prefer curves”…

        36-24-36 *is* “curvy”, you moron. FFS, it’s the whole point of the song.

        Selma Hayak, Beyonce, Angelina Jolie, Scarlett Johansson, Marilyn Monroe, etc. These are women with measurements in that ballpark.

        but you feel physical nauseous when looking at some 30+ BMI tumblrina … there’s nothing wrong with you, you’re the way nature intended.

        Right. Because the only way you should feel about a woman is “fuck it, or kill it with fire”.

        Stay classy.

  16. Hockey – hypocrite and parasite, talks out of both sides of his mouth. http://www.heraldsun.com.au/news/treasurer-joe-hockey-and-financial-guru-melissa-babbage-have-a-very-modern-political-marriage/story-fni0fiyv-1226645854591

    So, Melissa sells everything and Joe then criticises the Rudd stimulus response. Then he talks up the bubble in the most insensitive way and, predictably, Melissa and he are selling at least some of the property portfolio.

    Won’t handle a candle to Beazley either.

  17. So the “no change to NG” position was being directed by Abbott contrary to Joe’s wishes?
    The economic incompetence is breathtaking

    • Yeah, it is WAY beyond what most people think and inflating the whole system.
      What matters now is what happens when is stops, or even slows….
      Going back to the days of local money for local houses is going to be a big big change.

  18. Mining BoganMEMBER

    Truffles today called Bozo a ‘giant’ of the political world.

    No need for name calling.

  19. Hockey had 2yrs to fix
    The FIRB
    NG
    AML/CTL
    Fixing any one of these would have left a legacy worthy of note.
    He fixed nothing
    He failed
    That is his legacy

  20. So Hockey privately knew the damage negative gearing is doing, but for political expediency he choose to stay silent and do nothing. Kinda like a Director of a major corporation admitting he knew of loss making practices but choosing to do nothing at the expense of shareholders. This man should not be rewarded with a Diplomatic post.

  21. The comment on NG with specific stress on small business is interesting.

    A) bust your gut running a small business
    B) do as reusa says, buy an investment property, sit back and become more beautiful and rich, LOLOLOL!

    If NG is equally available for both A and B, it follows that B will be preferred. Why take the risk and spend the time on a small business when a friggin’ house can outperform it by just sitting there?

    Because A adds to net production and employment, while B ends up harming productivity due to the social impact of soaring house prices, it’s a no brainer that whatever form of NG exists, it should be skewed in favour of A over B. Better yet, scrap NG entirely but ensure that remaining general conditions favour A over B, and that extends to ripping up things like the TPP. Hockey knows this, he always knew it, but he’s a weak-as-piss, bankster-captured sellout (Christ, he’s even married to one), who would never do anything to harm his owners.

    Hard to believe that Turnbull is going to be any different. Australia’s government, like so many others in the OECD, has been captured by the banksters.

  22. I tried to follow what Skippy was pointing out above but got lost somewhere. Anyway whatever, can’t believe I actually thought for a moment I agreed with 3D1K?
    Anyway Joe was not much of a treasurer & I didn’t get what he spoke about most of the time. But in his defence the only time a politician can even utter the words with conviction that NG has to go (on existing builds) is when they are exiting the political arena. There is no way NG is ever going from the OZ landscape because its the “punters” tax evasion. You cannot get rid of it even if everyone on MB thinks its a big end of town tax scam & should go, the reality is its a “small” end of town punters wishing scam & therefore a politician is committing suicide if they advocate NG should go. (When I say NG I mean NG on property, NG on anything else is not material(?)).

  23. Good riddance.. One more spineless pollie goes into the dustbin of history (along with Gillard, Abbott and Martin Ferguson).

    Now I am waiting for Billy Shorten and Tanya Pilbersek to follow suit.

  24. He sure is the embodiment of the average Australian. Australia got the government it voted for and deserved.

    Now negative gearing is at least on the table. Of course nothing will happen until after the depression hits, but at least it’s now in the ‘crisis toolkit’.