"I'm sure we would all agree he is far more qualified than the three of us and that his opinion must carry significant weight."

If Eslake's saying buying a house, renting it out and selling it is subsidised by the taxpayer, then he's wrong, whatever his qualifications.

Butch, if you know him, ask him why NG/CGT have not the same effect in Perth as in Sydney. Ask him if buying-renting-selling as a company entity is subsidised, and whether individual negative-gearing is time-shifting losses by comparison, or not. The taxman gets fully paid under both arrangements.

If he can't answer these questions credibly, I'd have to ask whether he is a dispassionate observer, or motivated such as Steely is for family reasons.

Again, Sydney and Melbourne are local supply problems needing local solutions, not a harmful national sledgehammer approach.

There is no such as a local supply issue. As soon as the freeway from Melbourne to country vic was completed the corridors exploded. Spending their one million house gift from Melb and downsizing in financial terms in country vic.

The great divide is not a problem, Abbott is now sprucing using super to buy houses. What would the super savings of a sub 30 year old be. Not to mention what super was designed to be for.

There is one solution on the table

Dear Lucifrase,

I know whatever I put in front of you you are unlikely to change your mind on this but let's go through the exercise anyway.

The Grattan Institute says;

“The Treasury’s tax expenditure statement (TES) lists the cost of the capital gains tax discount as $6.15b for 2015-16. The TES does not list the cost of negative gearing, but using Grattan’s total figure and subtracting the value of the capital gains tax discount, this shows that the cost of negative gearing is around $5.5 billion… this cost exceeds the cost of child care assistance or university education as per the budget papers.”

And you can add to that the 6 billion dollars the federal government is forced to spend each year on improving housing affordability and you get a subsidy figure of around $18 billion a year.

Both as taxes spent and taxes foregone this is a public subsidy in almost anyone's language.

Granted negative gearing by itself is not the whole problem but once it is combined with the generous CGT discounts then it is little wonder investors make up over a third of house loans – over 50% in NSW.

Butch may be referring to a time both he and I with other hashed this out with Mr Estlake on OLO.
http://forum.onlineopinion.com.au/thread.asp?article=11849#202878

Why wouldn't you accept a tax regime which allowed you to account for losses on a property only against the income it made for the year and that any further losses be carried forward until the asset is realised?

A correction in paragraph two, of course,: ".... is 'ever' subsidised by the taxpayer..."

Companies carry forward operating losses and write them down against future profits. Individuals offset investment operating losses against income from paid work in the same tax year, i.e. time-shifting to the present what companies must defer to the future.

Where is the subsidy? Should gov't share in operating income but not outgoings? The claim off a subsidy by Eslake is motivated hogwash.

He says in Steely's link, "...get their interest bill subsidised or who are in otherwise advantaged by the tax system, particularly investors..." What is the garble after his bogus assertion about interest? He is either confused, motivated, or doesn't know what a subsidy is. The taxman gives nothing away through the allowance of NG over the term of an individual investment.

I take umbrage at being referred to as an ideologue because I call out Saul Eslake on basic facts, so take my statement about your motivation as intended, Steely.

"Why wouldn't you accept a tax regime which allowed you to account for losses on a property only against the income it made for the year and that any further losses be carried forward until the asset is realised?"

You mean why don't I support the total abolition of NG? I've made my case often enough, but in brief, some degree of it allows Joe average a better opportunity to achieve financial independence and it meets a community housing need. I've already suggested a limitation to NG that would retain a degree of this, on this thread and past threads, but you still insist I am an ideologue.

The Grattan Institute analysis cannot be correct because, as I have cogently explained, NG is a time-shifting mechanism. There is no loss to the taxman over the buy-rent-sell cycle. This is not denial, but fact. there is nothing gained by the taxman to spend on anything by abolishing NG. Yes, abolishing the CGT concession (unfairly as I have previously explained to your silence) will pull bucks.

What does this mean, "....but using Grattan’s total figure and subtracting the value of the capital gains tax discount, this shows that the cost of negative gearing is around $5.5 billion"? What 'total figure'? Whatever it is it must be a boondoggle, because no subsidy exists, and why the unnecessary emotive charge about child care and education attached to the statement? It rings of motivation and politics.

Dear Lucifrase,

Firstly to me calling you an ideologue on this. It has become my default reaction whenever intemperate language is used so this was more a response to “Sook, whine, gimme, gimme, gimme, whine!” than any in depth appraisal of your leanings. It usually saves me time but happy to withdraw it in this instance.

But back to business.

You wrote;

“The taxman gives nothing away through the allowance of NG over the term of an individual investment.”

Oh come on mate. So someone foregoing taxes through NG, when they are at their earning peak and on a high tax rate, then selling the property after retirement when their effective capital gains tax rate is not only substantially lower but receiving a 50% discount on top of it, doesn't mean the taxman receive less? Bunkum!

Look, there certainly are many aspects to this issue. For instance perhaps the case can be made that the billions of dollars floating around in super funds over priced the share market to such an extent that many are forced toward property to invest in.

But there is little doubt that the huge increases in those turning to housing for investing have driven prices and therefore capital returns, thus making the market more attractive in a self fulfilling cycle which obviously impacts affordability. You yourself recognise that NG is an enabler. More in the market has lead to higher prices, to making it substantially harder for first home buyers to escape the rental trap, and to less tax revenue for government.