Analysis: Abolishing Negative Gearing Will Hurt Lowest Earners Most

A new analysis by Michael Potter of the Centre for Independent Studies has revealed that the average benefit of negative gearing is considerably larger for low income earners, and reduces as income increases.

In a statement made today, Mr Potter noted that:

“Negative gearing abolitionists have been arguing the dollar impact of negative gearing is larger for the rich. However, this is the wrong approach. Many tax provisions provide greater dollar benefits to the rich, including the GST exemption for food, basic healthcare and water. Yet we hear no one arguing for the removal of these exemptions on that basis. Imposing GST on these items would be regressive, because the percentage impact decreases as income goes up. The proportional benefit of negative gearing is substantial at low income levels. This is the right way to look at the distributional impact of tax provisions, not using misleading figures about dollar benefits, and the numbers of nurses or anaesthetists who use negative gearing. And as these more relevant figures demonstrate, abolishing negative gearing will disproportionately hurt the poor,” Mr Potter said.

The detailed figures are below:

Decile Average taxable income in decile Average rental loss in decile
$ As % of average taxable income
10% 3,542 -741 -20.9%
20% 14,405 -291 -2.0%
30% 22,144 -335 -1.5%
40% 30,093 -454 -1.5%
50% 38,263 -499 -1.3%
60% 46,674 -588 -1.3%
70% 57,046 -754 -1.3%
80% 70,658 -947 -1.3%
90% 91,127 -1,257 -1.4%
100% 200,790 -2,435 -1.2%


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