We have a tax system that drives inequality and has locked an entire generation out of the housing market.
The Australian Greens have a costed proposal to make tax fair by phasing out the discount on Capital Gains Tax (CGT) over the next five years.
At present, income earned from sale of assets like property or shares is 50% tax-free while income earned in wages and savings is fully taxed. There is no reason for your hard earned wages to be taxed at the full rate but for investment income to be 50% tax-free. Nearly three quarters of the benefits of this concession go to the top 10% of income-earning households.
The Greens plan would phase out the CGT discount by 10% each year from 1 July 2016 until there was no longer any discount from 1 July 2020.
The Parliamentary Budget Office costings show this measure, combined with our proposal to phase out negative gearing, would generate $7 billion over forward estimates, and $119.5 billion over ten years.
The discount on capital gains tax and the use of negative gearing provide tax concessions for high income earners to accumulate more wealth, while wage earners are locked out of the housing market and pay higher rents. It is profoundly unfair.
According to Treasury’s own figures, in the next financial year, the discount on capital gains tax will cost the nation $6.84 billion, making it our sixth biggest tax expenditure item.
When you couple this with our reforms to negative gearing, the impact on the budget is even more substantial. Phasing out negative gearing and removing the discount on capital gains tax will generate upwards of $11.9billion for our economy each year over the next decade, with flow on effects into the housing market, especially for first home buyers who no longer have to compete with investors.
This substantial revenue would also deliver considerable benefits for communities around the country, through better funded services, including homelessness and housing affordability, as well as improved infrastructure, hospitals, schools, housing and public transport.
It is disappointing that the Abbott-Turnbull government lacks the courage to tackle the unfairness in our taxation system.
The Greens are providing genuine and progressive tax reform ideas to pay for the services and infrastructure Australians so desperately need, and help people afford a home.