Oz Federal Election 2013 - Discussion and Comments

[drsmithy]

i presume you are talking about negatively gearing investments including property?

Negative gearing is a huge market distortion and, effectively, taxpayers encouraging landlords to lose money, and subsidising them to do so.

Howard & Costello introduced the 50% CGT discount, which resulted in massive amounts of money pouring into real estate speculation and was a significant factor in the bubble.

 

[drsmithy]

Well hopefully it never happens but as you've already admitted to having a mortgage & this really is your pet gripe are you seriously telling us if the housing market plummeted by 50% in an American/UK style you would be happy?

I am not going to speculate on what you might mean by "American/UK style".

I am quite confident that if property prices were substantially lower than they are now - ideally having never bubbled at all - and the distortions that have caused them to bubble were not present, we would have a much more balanced and stronger economy than we do now.

A correction is inevitable. It will be painful. The longer the system is propped up before it crashes, the more painful it will be, but if the result is a removal of the distortions that caused it, the country has a whole will be better off.

Presumably you don't think that's going to happen though or you would be renting.

I don't live in my property.

So you're just saying its an unjustified boom but in reality you've supported it by buying a house at an inflated price.

I bought my property over a decade ago. Long before I knew what I know now.

 

[drross]

Negative gearing is a huge market distortion and, effectively, taxpayers encouraging landlords to lose money, and subsidising them to do so.

Howard & Costello introduced the 50% CGT discount, which resulted in massive amounts of money pouring into real estate speculation and was a significant factor in the bubble.

no one in their right mind invests to lose money! And as a landlord yourself, you should understand that

 

[drron]

Every day I wake saying to myself I will not answer Medhead as I know he feels everything he says is the absolute truth and no one else can be unless they agree.
But Medhead you are sprouting bulldust.If your income goes up the percentage of tax goes up if you are paying personal taxes.In my case I am earning less than in 2006/07 but paying more in absolute taxes for 2012/13 than I did then.And before you jump to your feet saying impossible it is because of the withdrawal of tax deductions.
And I guess you saying that Government spending is not the only factor in GDP growth in that time means you really do agree Wayne really was speaking a mistruth when he claimed all the responsibility for our economy staying out of recession.
And simple maths says if the tax revenue of the Government has gone up in excess of inflation with corrections for population growth then people are paying more taxes.

Now you and others don't want to believe that Rudd/Gillard/Swan are greater taxers than Howard/Costello so you use % of GDP.As you would say to someone of the right you cherry pick your statistical method.

And to a different subject-on the matter of housing I am in complete agreement with Drsmithy.

 

[drsmithy]

no one in their right mind invests to lose money!

I agree completely, but few in this country are in their right mind when it comes to property. Again, I draw your attention to the attitudes of people to all other expenses that make up cost of living _except_ real estate.

Everyone who negatively gears their property is losing money on it. Which is, last I checked, around 2/3s of them.

They _hope_ they'll make it up in capital gain (which is where that ridiculous 50% CGT discount comes in), but a) that is speculation, not investment, b) is becoming increasingly less likely and c) is barely removed from a ponzi scheme.

And as a landlord yourself, you should understand that

My property is not negatively geared.

 

[medhead]

Every day I wake saying to myself I will not answer Medhead as I know he feels everything he says is the absolute truth and no one else can be unless they agree.
But Medhead you are sprouting bulldust.If your income goes up the percentage of tax goes up if you are paying personal taxes.In my case I am earning less than in 2006/07 but paying more in absolute taxes for 2012/13 than I did then.And before you jump to your feet saying impossible it is because of the withdrawal of tax deductions.
And I guess you saying that Government spending is not the only factor in GDP growth in that time means you really do agree Wayne really was speaking a mistruth when he claimed all the responsibility for our economy staying out of recession.
And simple maths says if the tax revenue of the Government has gone up in excess of inflation with corrections for population growth then people are paying more taxes.

Now you and others don't want to believe that Rudd/Gillard/Swan are greater taxers than Howard/Costello so you use % of GDP.As you would say to someone of the right you cherry pick your statistical method.

And to a different subject-on the matter of housing I am in complete agreement with Drsmithy.

Right so now you want to bring in corrections for population growth and such. That doesn't fit with your suggestion that total, absolute tax take is the only measure of importance.

A little tip but governments don't have withdrawal of tax deductions and such. I made an analogy that was supposed to be aligned with the situation of the nation. GDP is the income of the nation. The tax take as a percentage of GDP shows the tax burden of the government on the economy. By using a comparable measure we see that Howard was a greater burden on the nations income even if the absolute cash dollars taken in were less. You'll find I'm actually applying the same statistical measure to both.

Now as for housing we agree there, maybe

no one in their right mind invests to lose money! And as a landlord yourself, you should understand that

That's right no one sets out to lose money. And negative gearing and the 50% CGT discount allow investors to put more money into property without losing money. That inflates property prices, which is the point.

As for investors not losing money. My experience as a landlord is limited, but my property contributed a loss to my tax return for every year except one (poor planning on my part). That one year it made me about $600. However, the property generated positive cash flow every year, even with the rent tripling over the period that I held the property.

 

[drron]

See it is pointless to argue with you.
But in Maths a greater number is a greater number.basic fact and in the real world is vitally important.

 

[medhead]

See it is pointless to argue with you.
But in Maths a greater number is a greater number.basic fact and in the real world is vitally important.

Ok then. So by your facts and standards Henry Parkes had the lowest taxing government ever. Still I wonder why the treasury papers around the budget don't use your childishly simple comparison. Perhaps because the issue is not the mathematical meaning of greater than. The issue is the number you're trying to compare. I'm arguing about the number being compared. Your arguing about something else. No wonder you have such difficulty.

Last time. Totally tax take is not comparable over time. Your comparison is false. Nothing you say changes that fact.

 

[amaroo]

Re: Abbott in Government

AEC showing

Libs/Nat 91
ALP 54

With 6 seats to close to call.

 

[straitman]

Re: Abbott in Government

..... and the topic was what again :?:

 

[medhead]

Re: Abbott in Government

..... and the topic was what again :?:

Exactly. Dare I suggest the previous 2 posts be deleted as off topic?

If yes then also this one.

 

[drron]

Maths is an exact science.Economics is not.
If today's tax take is converted to 2007/08 dollars and compared to the tax take then it is greater.That is a fact.
There is more than one way to skin a cat just as there is more than one way to compare rates of taxes.
I pay significantly more tax now that is a greater % of my income than ever under Howard/Costello.Many here allude to the same fact.To us your argument means absolutely nothing.

 

[drsmithy]

I pay significantly more tax now that is a greater % of my income than ever under Howard/Costello.

How ? Tax rates are lower, thresholds are higher, handouts are similar or increased.

 

[drron]

How ? Tax rates are lower, thresholds are higher, handouts are similar or increased.

And deductions are also down.I am not going to release my income tax returns but believe me the changes are dramatic.

 

[Rebekkap]

Maths is an exact science.Economics is not.
If today's tax take is converted to 2007/08 dollars and compared to the tax take then it is greater.That is a fact.
There is more than one way to skin a cat just as there is more than one way to compare rates of taxes.
I pay significantly more tax now that is a greater % of my income than ever under Howard/Costello.Many here allude to the same fact.To us your argument means absolutely nothing.

From the ATO website

2007–08
Taxable income - Tax on this income
$1–$6,000- Nil
$6,001–$30,000 - 15c for each $1 over $6,000
$30,001–$75,000 - $3,600 plus 30c for each $1 over $30,000
$75,001–$150,000 - $17,100 plus 40c for each $1 over $75,000
$150,001 and over - $47,100 plus 45c for each $1 over $150,000

The basic tax scale for 2012-2013 is as follows:


Taxable Income - Tax on this income
0 – $18,200 Nil
$18,201 – $37,000 19c for each $1 over $18,200
$37,001 – $80,000 $3,572 plus 32.5c for each $1 over $37,000
$80,001 – $180,000 $17,547 plus $37c for each $1 over $80,000
$180,001 and over $54,547 plus 45c for each $1 over $180,000

the thresholds have increased considerably - even if you're in the enviable position of earning over $180,000 you're not paying more tax as a percentage of your income than you were under Howard. Under Howard, on $180,000 you were paying $60,600 on an income of $180,000. After six years of Labor, you're now paying $54,547.

if you're earning $100,000, under Howard you were paying $27,100. After six years of Labor, you're now paying $24,947.

if you're on closer to the average wage, on $60,000 under Howard you were paying $12,600. After six years of Labor, $11,047.

I'm not an economist, but that's a pretty easy fact to check and a pretty easy calculation to make. Your claim is simply completely wrong - nothing to do with ideology but the facts don't support your statement. There is no income level at which you would be paying more tax now as a percentage of your income than you were at the end of the Howard government (which is when taxes under Howard were at their lowest.)

 

[medhead]

Maths is an exact science.Economics is not.
If today's tax take is converted to 2007/08 dollars and compared to the tax take then it is greater.That is a fact.
There is more than one way to skin a cat just as there is more than one way to compare rates of taxes.
I pay significantly more tax now that is a greater % of my income than ever under Howard/Costello.Many here allude to the same fact.To us your argument means absolutely nothing.

Unfortunately for your argument I'm talking about GDP and total tax collected by the government. Not your personal tax situation.

Perhaps you might like to check out the transition to retirement provisions of super.

 

[drsmithy]

And deductions are also down.I am not going to release my income tax returns but believe me the changes are dramatic.

I'm not asking for your tax returns.

I am interested in what you used to be able to deduct, that you no longer can.

 

[HarryB]

Everyone who negatively gears their property is losing money on it. Which is, last I checked, around 2/3s of them.

They _hope_ they'll make it up in capital gain (which is where that ridiculous 50% CGT discount comes in), but a) that is speculation, not investment, b) is becoming increasingly less likely and c) is barely removed from a ponzi scheme.

You'll need to explain this to me, and I am not trying to be smart here because I genuinely want to know what I am missing.

Say you buy an investment property for $400k. If you loan the whole amount plus fees your mortgage would be in the vicinity of $420k which, with a 7% comparison rate principle and interest mortgage works out to about $690/week in repayments. If you rent the property at a conservative rate of about $385/week (a not unreasonable assumption of 5% of the purchase price) then the difference is $305/week which as the owner you would need to pay. So if you dismiss the considerable deductions you are able to make including taxable income reductions along with extra costs like maintenance etc then over the life of the mortgage it costs you personally around $475800 for the property. There aren't many properties in Australia that wouldn't increase in value by 19% or so over a 30 year period so the property is almost certainly going to be worth more than you paid for it (even at an average value increase of 1% per year it would be worth $540k or thereabouts). Unless there are significant changes to tax, like removal of negative gearing, I must be missing something if I think I wouldn't lose money on that deal. Of course, if you take a principle only mortgage the numbers are significantly different and unless you pay off the principle you would still owe $420k after 30 years.

All investing relies on a certain amount of speculation, so my analogy of course relies on some of that but I would suggest the deductions I could make would outweigh additional costs of maintenance making the gain larger than I have calculated.

 

[drsmithy]

Say you buy an investment property for $400k. If you loan the whole amount plus fees your mortgage would be in the vicinity of $420k which, with a 7% comparison rate principle and interest mortgage works out to about $690/week in repayments. If you rent the property at a conservative rate of about $385/week (a not unreasonable assumption of 5% of the purchase price) then the difference is $305/week which as the owner you would need to pay. So if you dismiss the considerable deductions you are able to make including taxable income reductions along with extra costs like maintenance etc then over the life of the mortgage it costs you personally around $475800 for the property.

Those additional costs are a bit too significant to just ignore, however (assuming an apartment):

Body Corporate - $5,000/yr
Rates - $1,000/yr
Utilities - $1,000/yr
Maintenance - say, $2,000/yr (assuming no major disasters like flood, etc)

So the $305 you're losing each week is really more like $480.

Now, if you're a somewhat average punter on $75,000/yr, your tax bill has gone down from about $21k to about $11k thanks to the ~$25,000 you're losing each year on your property. So your net loss is really more like $12,000/yr, or about $360k over 30 years.


Let's say the property appreciates a bit above inflation at 3.5%/yr and eventually sells for around $1,140,000.


After 30 years you've netted ca. $690,000, minus whatever CGT takes.




On the other hand, if you'd taken that same $290/wk (ie: $15,000/yr) and put it into high interest savings accounts or term deposits, earning an average of, say, 4.75% after tax, and reinvesting all the interest (so pretty much the most hands-off, conservative, secure and liquid investment known to man), after 30 years you'd have a touch over $1 million.

All investing relies on a certain amount of speculation, so my analogy of course relies on some of that but I would suggest the deductions I could make would outweigh additional costs of maintenance making the gain larger than I have calculated.

If you are planning to get the bulk of your return from capital gain rather than yield, I propose to you that you are speculating, not investing.

 

[mono88]

Maths is an exact science.Economics is not.
If today's tax take is converted to 2007/08 dollars and compared to the tax take then it is greater.That is a fact.
There is more than one way to skin a cat just as there is more than one way to compare rates of taxes.
I pay significantly more tax now that is a greater % of my income than ever under Howard/Costello.Many here allude to the same fact.To us your argument means absolutely nothing.

Some people argue that maths is not a science but an art. Whatever it is, and economics is the "dismal science", but maths is an essential tool used in economics also.
One of the main reasons economics is uncertain and inexact is because, amongst other things, it tries to make sense of people's behaviour and actions, not because it is inferior.