READ MY LIPS: NEW TAXES

Dylan Walters discusses the taxes that are already in store for us in 2016:

At the 1988 Republican Convention, nominee for President George H W Bush heroically told his supporters that he would face up to Congress and say “read my lips: no new taxes” if they tried to bully him into raising taxes.  Two years later when in government, President Bush did just that.

Last year Prime Minister Malcolm Turnbull made promising noises about tax reform saying “everything is on the table”.  If you think this suspiciously sounds like code for more taxes you could be right.

January is not yet over yet the government is already rubbing its hands at the prospect of a new proposal to apply the capital gains tax to owner-occupied homes, as discussed in Robert Carling’s article.

Carling notes that those who argue for more government revenue see enormous potential in this asset class, as it is exempt from both state land tax and Commonwealth capital gains tax.

It is certainly promising yet not surprising that the major political parties see this proposal as political hemlock, leaving aside that it is faulty economics.  Capital gains tax is widely viewed to be inefficient and the revenue raised from the tax does not justify the cost of administering it.  As Carling notes “There is a strong economic case against any capital gains tax, let alone pruning the current 50% discount (as some propose) or extending the coverage to owner-occupied housing. Besides, the amount of revenue claimed for the family home tax with a $2 million threshold is grossly exaggerated.”

Until politicians of all persuasions seriously accept that we have a spending problem and not a revenue problem then we will never make any advances in real tax reform.

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