The public back and forth between Prime Minister Malcolm Turnbull and CEO of the Grattan Institute John Daley has continued, with Daley writing of Turnbull in the Australian Financial Review
that “none of his criticisms stick”.
Earlier this week the Grattan Institute published a report that recommended restricting negative gearing deductions to non-wage income, and cutting the tax discount for capital gains from 50 per cent to 25 per cent.
The Prime Minister responded with a blog post stating that the Grattan report was “littered with factually incorrect statements” and “left a lot to be desired”. He also told the ABC that rather than being skewed to serve the wealthy, negative gearing was mostly used by mum and dad investors, pointing to the fact 70% of those who negatively gear own just one property.
However, Daley’s retort took aim at Turnbull’s assertion that negative gearing is a “generally accepted principle”, pointing out that the practice is not accepted in most other developed countries.
Daley also argued that tax changes would lead to more home ownership, more investment in assets other than property, less investor leverage and $5 billion more in tax a year, leading to a step in the right economic direction, if not curing all ills. He also insisted that the proposed changes would make for a fairer system and deconstructed Turnbull’s claim that negative gearing would reduce gross rental income by around 10%.
Asked by Australian Broker
what he made of the exchange between Turnbull and Daley, CEO of the FBAA Peter White said, “It’s good to think these things through and get different opinions on these matters. There’s nothing wrong with having the debate.
“But I stand resolute with my previous comments that any changes to negative gearing would be a negative outcome to our economy and to investors and to people who rent properties. There are many ways the government can look to save money, all of which can be explored.
“Changes to negative gearing would have a lot more serious effects than just sheer mathematics and saving money along the way. I think [the debate] goes far beyond just trying to rectify the balance sheet.”