A reduced discount is a lot better than the government’s flawed model but would come at greater cost to the economy than if revenue was raised from other options.
The new CGT system will bias retail investors heavily against risk-taking and will push investment towards low-risk assets such as owner-occupied property.
There is survivor bias when we see a successful business that we think pays too little tax, as we do not observe the businesses that fail along the way.
A diversified portfolio of shares will likely fare much worse than housing due to a little-understood feature of the pre-1999 rules that the system is reverting to.
The other options on the table would lead to fewer new houses being built and make the intergenerational equity problem worse.
Framing debates about tax concessions in terms of intergenerational equity reflects a redistributionist, zero-sum mindset that ignores growth.
It is arguably unfair to middle-income earners who sell a property to be pushed into a higher tax bracket for that year.
Contrary to the consensus reached by hand-picked participants at Labor’s economic roundtable, income tax progressivity has not changed much since the 1980s.
The change would do less damage than most other options, including updates to corporate and personal income tax.
