Capital gains myth: Tax hike won’t fix the housing crisis — across NewsCorp
A new research paper published today by the Centre for Independent Studies suggests proposals to reduce the 50 per cent capital gains tax discount would put at risk investment in housing, driving up rents while having a limited impact on soaring house prices.
The report’s author Robert Carling – a former NSW Treasury economist and senior fellow with the Centre for Independent Studies – said “myths” suggesting changes to the CGT discount would resolve Australia’s housing crisis were misguided.
“Capital gains tax is frequently portrayed as a simple lever that can fix housing affordability, inequality and the budget all at once. But the economic reality is far more complex,” he said.
“Changing a longstanding policy that underpins investment decisions across the economy should not be done lightly. There is no strong evidence that cutting the discount would solve the problems its critics claim.”
The Centre for Independent Studies research paper finds that some form of concessional treatment for capital gains is “economically justified” and widely used internationally, and says the current 50 per cent discount should be left untouched given it’s “simple, well-understood and embedded in investment decisions”.
The report argues the housing affordability crisis should be addressed through planning, zoning and other reforms that boost housing supply, rather than through “blunt tax changes that affect the entire investment landscape”.
The Centre for Independent Studies paper also disputes Parliamentary Budget Office figures that suggest the capital gains discount, in its current form, would cost the federal budget $247bn in forgone revenue over the next decade.
It says the figures are “misleading”, arguing that any reduction in the CGT discount would reduce asset sales, meaning any additional revenue would be far smaller than the estimates suggest.