Monday, February 15, 2016

Negative gearers aren't poor, Mr Morrison

It's the myth that keeps going round, in part because it contains an element of truth.

"Two-thirds of the people who use negative gearing currently have a taxable income of $80,000 or less," Treasurer Scott Morrison told Sydney radio station 2GB on Monday.

The figure makes it sound as if negative gearers aren't particularly well off, which is why the Property Council started circulating it.

It's genuine as far as it goes. It comes from the Tax Office. But it's not what it seems. Note the use of the words "taxable income". The figure of $80,000 is what two-thirds of the people who use negative gearing manage to reduce their taxable income to as a result of negative gearing. Before negative gearing, their incomes were higher, in some cases far higher.

The same figures show an astonishing number of negative gearers report taxable incomes of $10,000 or less. They would make no sense if that was what the negative gearers actually earned (what bank would lend to them?) but they make a lot of sense if they had used negative gearing in order to push their taxable incomes below $10,000.

The word "chutzpah" is often illustrated by the joke about the the boy on trial for murdering his parents who begs the judge for leniency because he is an orphan.

It's funny because the boy has done it to himself. Most negative gearers appear to be less well off than they are because they have used negative gearing to do it, sometimes to absurd lengths.

Labor has dug into the same figures and discovered that 64,000 negative gearers report taxable incomes of less than zero. No one, certainly not the Treasurer, would believe they actually earned less than zero.

There may well be good arguments for retaining negative gearing. The apparent poverty of negative gearers is not one of them.

In The Age and Sydney Morning Herald