Monday, March 22, 2004

Give baby boomer housing investors still more tax breaks . . .

. . . seems to be the main suggestion of 62 y.o. Professor Allan Fels, on how to solve the current dearth of affordable housing (either rented or bought) for GenX.

Go figure. As two other academics have recently pointed out, the current house price bubble has one chief cause: negative gearing [which] is an inequitable baby-boomer tax break*.

But baby boomers, and GenX for that matter, don?t even figure in Fels? analysis. Never mind that home-ownership/buying rates for GenX have plummeted in the last 15 years ? Fels? implication is that this is either a positive, or at worst, neutral thing. Restoring GenX home-ownership rates to their long-term average (= that of his and the boomer generations) would involve ?middle-class welfare?, and so it simply can?t be done. And what a shocking rort for GenX the $7,000 first-home buyers grant has apparently been is said to prove Fels' case.

Actually, to be perfectly honest, you can take the $7,000 away, Allan ? I really don?t care, and I doubt I'm ever gonna get to use it personally. It?s such a pissy amount ? from next year, less than what the average uni student will pay for sitting on the floor in an over-crowded classroom for a year ? that?s it?s not even worth arguing about. ?Middle-class welfare?? Yeah, whatever. I?m sure that some soup kitchens are secret five-star restaurants too ? so it?s best we shut them all down now, to be on the safe side, eh Allan?

What Fels is really on about, of course, is ratifying the emerging status quo ? in which the average baby boomer owns 2 houses and the average GenXer, zero. Gee, that?s a nice little recipe for social cohesion, Allan ? boomer landlords and their GenX tenants for life.

* Judith Cockburn-Campbell and Robert Leeson ?The negative legacy of a baby-boomer tax break? AFR 18 March 2004 (no URL)

Update 23 March 2004

Today's AFR front page has a story on how the depreciation rules on investment residential property might soon be brought back into line*. It's about time, too - specialists in rorting depreciation have lead to what is probably the biggest-sized tax avoidance industry since the Bottom-of-the Harbour days of the late 1970s. Unwisely, I would have thought, some of these specialists are quoted in Fin story, screaming like stuck pigs. At least the ATO shouldn't have to put on aqua-lungs when it comes to raiding this lot of shonks.

* Robert Harley "ATO targets property tax breaks" AFR 23 March 2004 (no URL)

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