Simon

Armchair economist and Never Trumper.

[Simon @litnation3000]

@whmacdonald74 @clairlemon @GeoffWilsonWAM @Quillette If being wrong on economic matters was a reason not to take advice, you’d be hard pressed to find an expert worth listening to.

[Simon @litnation3000]

@ajamesbragg @grok what was rhe cumulative total increase in Australian house prices from 2013 to 2022?

[Simon @litnation3000]

@RizviAbul @RizviAbul this comes up a lot. Idea for your next @independentaus column: why we can’t go back to 2004. Is it just a population ageing issue?

[Simon @litnation3000]

@whmacdonald74 @clairlemon @GeoffWilsonWAM @Quillette To be clear indexation is preferable to 50% discount. Indexation of losses would be an improvement and then Scandinavian system with (making it up) 2 or 3 step rates with no tax free threshold is probably the way to go.

[Simon @litnation3000]

@whmacdonald74 @clairlemon @GeoffWilsonWAM @Quillette If you make security b return 15% then you get a 49.3% real tax rate

[Simon @litnation3000]

@whmacdonald74 @clairlemon @GeoffWilsonWAM @Quillette Assume a 50\50 $10k portfolio held for 10 years, inflation 3% and marginal rate of 47%. Security a delivers 2%, security b 6%. 50% disc generates a $1,187 tax bill, 23.5% nominal and 73.3% real effective tax rate. Indexation generates a $1,050 nominal 20.8% and 65.2% real tax r.

[Simon @litnation3000]

@whmacdonald74 @clairlemon @GeoffWilsonWAM @Quillette No, that’s my point. I’m fine to see a boom in resi construction but I don’t think tax policy should be written with that in mind. The strong advice from treasury was that a neutral tax system was what we should be aiming at.

[Simon @litnation3000]

@whmacdonald74 @clairlemon @GeoffWilsonWAM @Quillette I didn’t say it isn’t a problem, I’d be in favour of the quarantined indexation of losses

[Simon @litnation3000]

@whmacdonald74 @clairlemon @GeoffWilsonWAM @Quillette I have no issue with a capex book in new housing, but what we’ve had is a lot of capital going to speculation on existing housing. Interestingly the budget papers made the point that lower capital return housing stock (higher densisity) has been disadvantaged by 50% disc.

[Simon @litnation3000]

@whmacdonald74 @clairlemon @GeoffWilsonWAM @Quillette Can you explain the last bit? I’m not following you.

[Simon @litnation3000]

@whmacdonald74 @clairlemon @GeoffWilsonWAM @Quillette Also it’s difficult to make the argument that because a large portfolio with a high dispersion of return will generate a very high real tax rate, therefore the real tax rate applies to all capital. Most taxpayers have smaller portfolios.

[Simon @litnation3000]

@whmacdonald74 @clairlemon @GeoffWilsonWAM @Quillette Let’s not beat around the bush, it’s a tax increase on capital income. In my view a scandanavian style dual income system would be best, but this is an improvement on the 50% discount.

[Simon @litnation3000]

@ausstockchick This is possibly better news that the house price corrections itself. Literally made my day.

[Simon @litnation3000]

@whmacdonald74 @clairlemon @GeoffWilsonWAM @Quillette Also if that’s the case why is Geoff now running scare campaigns on property prices? Again, a question of character

[Simon @litnation3000]

@whmacdonald74 @clairlemon @GeoffWilsonWAM @Quillette Lastly I’d urge to go and read the original Ralph review. It argued that the 50% disc would be revenue neutral, would spur ownership of shares and would lead to more asset churn. All three of these were wrong. Failure on its own metrics.

[Simon @litnation3000]

@whmacdonald74 @clairlemon @GeoffWilsonWAM @Quillette That’s one of the differences, and again there is a strong argument to lift the GST. In the last budget the cgt discount was costing revenue over $20b a year. If that amount was invested into lowering rates, it would make a meaningful difference.

[Simon @litnation3000]

@whmacdonald74 @clairlemon @GeoffWilsonWAM @Quillette The 50% discount was in most cases far too generous and has pushed the tax system into a too heavy reliance on personal income tax. Ultimately a concession somewhere requires revenue elsewhere to offset it. I’d like to see rates come down and tax brackets be pushed out.