Negative gearing robs schools hospitals etc

I spent much of my professional life as a Chartered Account advising clients on taxation. I never recommended it though I also did not realise how much negative gearing would rob schools and hospitals of much-needed money. It featured in the media including a Sydney Morning Herald survey report today.

Banks and property developers gain most

Whilst it aids tax evasion, people spend $1 to gain 25 cents tax reduction, not a brilliant strategy. But it greatly enriches the property developers, pushing up housing demand and prices. Even more, it enriches the Big Bank Barons by encouraging debt. Negative gearing is all about debt really.  No wonder CBA earned 4,500 times in real money terms last year what it did when I began my own Chartered practice in 1971. No wonder that, while Aussie queue in ambulances outside overcrowded hospitals, bank CEOs now earn between $50,000 and $100,000 A MONTH. Politicians seeking to also enrich themselves by this tax evasion scheme have also lined up to buy an extra house of three, depriving more voters of home ownership.

Migration delivers the capital gain

To make sure that tax free capital gains kept rolling in they have increased the immigration numbers to push up demand for homes and so the prices that make negative gearing so tax-evasion-effective. What the tax evaders often forget is that the value of the capital gain they receive years into the future is seriously reduced by firstly the inflationary devaluation of the dollar and secondly the money they could have earned on the money they have invested in this loss-making venture.

Voters suffer

Voters suffer homelessness, serious untreated illness, lack of education to build decent careers and lifestyles, poor public transport and bad roads,  to fund this tax evasion extravaganza for those rich enough to borrow big.

Foreclosure the risk

The downside risk is the collapse of the housing market and foreclosure on all properties including the one they are living in. Whatever happens, the moneylenders and developers will come out richer.