Property market: Negative gearing is not a rort but a principled, fair and efficient feature of any tax system

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Negative gearing is said to single-handedly be responsible for Australia’s housing crisis. But it is a principled, fair, and efficient feature of any tax system.

So-called “negative gearing” is public enemy number one and is said to single-handedly be responsible for Australia’s housing crisis.

That’s bizarre because these claims are completely wrong. Not difference-of-opinion wrong but logically-and-factually-incorrect wrong. Maybe it has something to do with the name. If these expenses happen to exceed revenues, so the asset makes a loss, then the investor’s tax liability is negative and in an ideal world, the government would refund it. That is what is required to collect tax revenue on capital returns in an economically efficient manner. Any deviation from that benchmark destroys economic activity, plain and simple.

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