Prosper Australia

Negative Gearing provides cream for nation’s wealthiest

Our topsy turvy tax system sees commentators claiming: “In most businesses, losing money is frowned on. In this one, however, it has become the spirit of the game, with landlords writing off their claimed losses against tax, and effectively using the savings to subsidise their property investment.”

So with an annual $3 billion subsidy provided by negative gearing, a record house & land price boom and governments at all levels bending over backwards to assist the property lobby, why do we still have a massive shortage of housing?
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Letter to the Age

Dear Sir,

So let me get this right. Messrs Howard and Costello say the economy has been going so well that the RBA intervened by increasing interest rates to slow it down again? But why should anyone want slow down a healthy economy? Did the government have it going too well? Can Mr Costello explain where the line is between going well and going too well?

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Letter rejected by the Age (Melbourne)

As the Federal Government is planning an emissions trading scheme — not a carbon tax — why will households foot the bill? (”Householders to bear brunt of trading scheme”, the Age, June 25.)

Answer: An emissions trading scheme is a carbon tax payable not to the government, but to private polluters. As carbon credits become scarcer relative to demand, producers who need to purchase carbon credits will pay higher prices, which they will pass on to you and me. And who will be the beneficiaries? Obviously the sellers of carbon credits — who in the main will have received their credits as rewards for causing greenhouse emissions before the scheme was introduced!

An honest carbon tax would go entirely to the Federal Government, so that taxpayers might be compensated by cuts in other taxes. But polluters’ profits from carbon credits will be taxed as discounted capital gains, so that the rest of us will have far less opportunity for cuts in Federal taxes but will still pay the private tax.

Dear Editor,

Re: BCA: 56 taxes a company curse (The Age “Business Day” 10/4/07)

We hear low overseas wages given as the reason our manufacturers cannot compete with Chinese imports, but we don’t hear of the penalizing effect of the multitude of taxes on our manufacturers. It would be surprising if Chinese manufacturers were similarly penalized. Production wages form only a small proportion of the price paid by the public for overseas products, particularly in these days of automation.

The joint Business Council of Australia and Corporate Tax Association call for a comprehensive review of federal and state business tax arrangements, should receive wide support, however, removal of a number of charges, such as payroll tax, should not await completion of such a review, whilst we have an escalating $500 billion foreign debt, with no end in sight and manufacturers disappearing almost on a weekly basis. These penalizing taxes on production should be replaced with realistic community resource charges on the use of land and all other finite resources including forests, water, oil, gas, minerals and the electro-magnetic spectra.

Yours sincerely,
David Barkley

The Age

Dear editor,

Alan Moran (The Age, August 3, “Land-based wealth an illusion”) has it partially right. He correctly claims that inflationary pressures provide the impetus for interest rate pressures. He also correctly claims that there is a disparity between supposed wealth levels and savings levels, most of which is due to a monstrously artificially high price of land.

However he is incorrect to assume that this is entirely due to stringent zoning rules which reduce the supply of land. This does indeed play its part. But the other factor has been the ill-considered reductions in land tax by the State government and moves from rates derived from site rental to capital value by local governments.

Both of these actions punish people who are productive, constructive, improve their homes and provide employment. They encourage investment in land over labour and capital, with not one new job created or one new good or service from these so-called investments.

Who can seriously be surprised at the results?

Yours sincerely.

Lev Lafayette