Of course negative gearing laws should be amended. As long as it’s done the right way

The notion that you can own a dozen properties all leveraged with debt, deducting the interest payments such that at the end of the process a high income earner pays next to no tax via some clever accounting is utterly absurd. It’s certainly inequitable. But if it’s legal, as it is under the current rules, of course those who can take advantage of it should.

Some negative gearing encourages investment and aspiration. Unlimited negative gearing distorts the market. It’s up to governments to chart the legislative pathway that supports one and denies the other.

But any change is politically dangerous if it involves another broken promise without doing voters the courtesy of seeking a mandate for the shift. Doing so before enacting it. Labor deceived voters on stage three tax cuts, having promised not to adjust the cuts before the election, backflipping afterwards.

We are hearing the same rhetoric from Labor now in a different policy space; that it has no intention of adjusting negative gearing. But it should have that intention, it just needs to go about it the right way. Honourably and in line with their (now false) integrity mantra they took to the last election.

In other words, negative gearing is a policy change that should be taken to an election. A viable component of an Albanese government re-election platform. I would certainly support the shift, if it’s done properly.

Which brings us to wider tax reform. Negative gearing shouldn’t become a piecemeal policy change simply because some politicians have an ideological problem with tax effective investments. It should be looked at in the context of wholesale adjustments across the tax spectrum. That should include finding ways to reduce Australia’s over reliance on income taxes. We have some of the highest income taxes in the world, and bracket creep has elongated that reality.

It should also include a closer look at how government spends our money. Does anyone seriously think they can’t tidy that up?

The other consideration is whether any adjustment to negative gearing can include any form of retrospectivity or not. Generally speaking retrospective legislative changes are frowned upon, which in this case would mean no tax changes to existing negatively geared properties. But that creates two classes of investment property owners. Politics might require such compromise, but another pathway forward could be a time based grandfathering. These are the sorts of details that will need to be nutted out before any policy change can be seriously canvassed.

The difficulty with where modern politics is at is that such changes are hard to discuss without scare campaigns dominating the discourse. Thereafter the debate gets sullied by spin and fear. This is yet another reason why the reforms need to take in multiple elements and be wholistic. Selling or opposing a wide ranging package.

Such reforms will still fall victim to scare campaigns, but such tactics only work if the voting public fall for them. If they do, as unfortunate as it can be if you think the policy change is a good idea, that’s both politics and democracy in action. What’s the alternative? Curtailing free speech? Curtailing democracy, replacing it with autocracy? No thanks.

Dr Peter van Onselen is Winthrop professor of politics and public policy at the University of Western Australia.