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?

Yesterday’s Wherever I lay my debt, that’s my home report by NATSEM again reminded us how desperate we are for some hard nosed reform. Talk-a-lot Rudd continues to push affordable housing as the answer. With land and housing prices having increased by 400% to incomes 100% between 1985 – 2004, one wonders if it is actually the house going up in value? Landlords writing off their depreciating house values (as well as claiming the negative gearing) would sheepishly tell you that it is the land underneath that is most important. Location, location!

However, hoarding land is in the landlords best interest. Enforced scarcity pushes up prices. Owning an old run down property ensures the community subsidises such wastage through negative gearing. Unmentionable by most major newspapers is the fact that our taxes provide a further subsidy by building better roads, schools and policing.

Land reform is the most important reform required for affordability to take root. Switch taxes off incomes and place them on land and resources to curb speculation and reduce compliance. Read the Clyde Cameron piece to understand this from a historical perspective.