Thursday, June 24, 2004

Tax breaks for investors put brakes on first home buyers: "The tax treatment of property, especially the Coalition Government's decision to halve capital gains tax in 1999, has encouraged property speculation by the wealthy at the expense of those wanting a first home. The Productivity Commission is not alone in questioning tax breaks for property investors. Earlier this month the Reserve Bank Governor, Ian Macfarlane, said tax laws relating to investment properties were being 'interpreted too leniently'.

"'We think about forms of negative gearing which appear to be so contrived and so unlikely ever to make any cash flow and are still permitted. We think those should have been addressed,' he said. There are several reasons why both the Government and Labor are ignoring the concerns being raised.

"The growing pool of small investors who would be affected, especially landlords, would be incensed. About one in seven households have an investment property, easily the highest ratio in the developed world. Federal Labor would face a massive scare campaign if it proposed any changes to property related taxes. It seems the best hope for those struggling to buy a first home is for a big fall in prices."

Its a zero sum game: it can no more be the case that everyone is an 'investor' with tenants paying them rent than everyone can be a slaveholder with slaves doing their work for them. Somebody has to be the tenant/slave.

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