CGT debate misses the bigger picture

There is a lot of debate in the media and among economists over whether the federal government should cut the capital gains tax (CGT) discount for housing in the upcoming federal budget.

There are also rumours that the government is considering capping the number of homes individuals can negatively gear to two.

The CGT discount, combined with negative gearing, is too generous and has encouraged over-investment in Australian housing, which has helped push up home prices at the margin, crowded out first-home buyers, and reduced the home-ownership rate.