Why should the wealthy get tax cuts?

HOW are we supposed to live within our means if governments won’t pare back tax concessions skewed to high income earners, asks Chris Bowen.

LABOR has led the tax debate for the last year, this is something I am proud of. It’s meant we’ve had a better quality public debate than otherwise would be the case.

If Malcolm Turnbull had lived up to his own hype and publicity, we might have had both major parties taking ambitious and competing tax reform packages to the election.

Alas, the temptation of a scare campaign, albeit on weak foundations, was too much for the Liberal Party.

It’s telling though that here we are, less than a week out from this government’s last Budget, and with a July 2 ­election looming, and the Prime Minister has no economic or tax policy of his own to argue for.

Instead, next week, we will see a treasurer reduced to a budget where he makes the case for or against Labor’s revenue proposals, such as on super tax concessions, multinational tax and tobacco excise.

Labor will continue to be fearless in outlining fair budget repair and how we will be paying for important social investments like schools and hospitals — in complete contrast to the approach Tony Abbott took at the 2013 election and with the 2014 budget of broken promises.

What Daily Telegraph readers might not know is that in 2005 Mr Turnbull called negative gearing “tax avoidance”. Now we don’t agree, but think it can be better targeted in a way that is good for the economy, growth, jobs and housing supply and affordability.

What lies at the heart of Labor’s Plan for Housing Affordability is making sure the housing market has young first owners on a level playing field with investors who are looking to purchase their 10th or 11th property

As I move around the country, parents and grandparents come up to me to talk of their concern that future generations of Australians are in real danger of being permanently locked out of the property market.

Shadow Treasurer Chris Bowen.

Malcolm Turnbull, in these pages a few days ago, confirmed that he doesn’t understand that concern and doesn’t want to do anything to fix it.

How Federal Labor’s Plan for Housing Affordability works:

● From 1 July 2017, property investors will only be able to negatively gear ‘‘new’’ properties, which will promote greater housing supply;

● From 1 July 2017, the capital gains tax discount will be halved from 50 to 25 per cent;

● All existing property investments will be grandfathered, meaning if you purchase or own an investment property prior to 1 July 2017, the current negative gearing and capital gains tax discount arrangements will apply; and

● If you’re engaging in a genuine business activity like investing in your small business, you will continue to be able to negative gear investment losses against your wages and salary income.

The government needs to explain how it can have a Budget theme of “living within its means” but yet leave untouched what Scott Morrison labelled the “excesses” of negative gearing where 50 per cent of the tax benefit flows to the top 10 per cent of income earners?

The well-respected and independent Grattan Institute published a report “Hot Property, negative gearing and capital gains tax reform”.

It methodically sweeps through some of the just plain wrong statements the Prime Minister made in these pages on Tuesday:

1. With reform to negative gearing, even the Grattan model that goes further than Labor’s policy, property prices will continue to rise and in fact will be barely impacted at all;

2. Limiting negative gearing will not affect rents much at all and that’s the empirical evidence of 1985-87;

3. Investors will look beyond negative gearing for the other benefits of property investment, i.e. the income stream and capital gain that it may generate, and again, comparable countries like the US, Canada and the UK that don’t have our generous tax concessions for property investment, have solid investment in ­property.

Turnbull belled the cat himself on the 7.30 Report on Tuesday when he said: “That’s beside the point — of course people on the highest incomes will make the highest gains because they tend to have more property.”

That’s precisely the point Mr Turnbull, how are we supposed to be living within our means if governments aren’t prepared to pare back tax concessions that are skewed to high income earners?

Chris Bowen is the Opposition treasury spokesman