Latest news with #RogerWilkins
News.com.au
2 days ago
- Business
- News.com.au
‘Distasteful': Growing calls to tax the family home
A radical proposal to tax the family home has been described as a 'distasteful' but necessary measure to reduce 'inequality'. Ahead of Labor's three-day Economic Reform Roundtable in Canberra this week, economists from the University of Technology Sydney and Melbourne University have put forward their own 'bold' proposal, arguing it's time to 'time to consider taxing the family home' by ending the capital gains tax (CGT) exemption. 'This may seem distasteful, but there are some strong arguments for doing so,' Peter Siminski and Roger Wilkins wrote in The Conversation on Wednesday. Australia's capital gains tax, introduced by the Hawke Labor government in 1986, applies to the increase in value between when an asset was bought and sold. The family home, or technically the 'main residence', has always been exempt from CGT. Treasury estimates it forgoes around $50 billion a year in revenue by exempting family homes from CGT. In 1999, the Howard government also introduced a 50 per cent CGT discount if the asset is owned for at least 12 months. The CGT discount equates to around $19 billion a year in lost tax revenue. Scrapping the CGT discount, along with negative gearing — allowing property investors to deduct losses from their from taxable income — has long been called for by critics who argue the tax concessions help drive up house prices and fuel inequality. But touching the family home CGT exemption would be far more controversial. Neither major party has proposed scrapping the CGT exemption. As of the 2021 Census, 67 per cent of Australian's 9.8 million households owned their home, either outright or with a mortgage, while 31 per cent were renters. The overall rate of home ownership has remained steady at between 67 per cent to 70 per cent since the early '70s, but has dropped sharply among younger age groups who face greater barriers to ownership including rising prices and stagnant wage growth. Home ownership among 30- to 34-year-olds fell from 64 per cent in 1971 to 50 per cent in 2021, and from 50 per cent to 36 per cent among 25- to 29-year-olds. Prof Siminski and Prof Wilkins argue 'owner-occupied housing exacerbates inequality'. In a draft research paper, the economists have modelled what they argue is the true picture of Australia's income inequality by taking into account the 'income' that owner-occupiers derive from their family home — by including the 'imputed rental income', or what a homeowner would pay in rent, and unrealised gains on the value of the property. 'When these are included in the income measure, inequality is higher, and it increases more strongly over time,' they wrote. 'The effect is large enough to shift Australia's inequality from 16th to 10th highest amongst OECD countries. Unsurprisingly, outright homeowners are much better off than renters when income from the home is counted. They have an average income 86 per cent higher than the average income of renters — compared with 34 per cent higher if housing income is ignored, as it usually is.' They argue that in when viewed this way, Australia's progressive tax system, which reduces inequality by charging higher tax rates for people with higher incomes, is 'largely a mirage'. 'The income tax system reduces inequality by a lot less (about 40.5 per cent less) if we include such housing income,' they wrote. 'Because this income is tax-free, the average tax rate for the rich is much lower than it seems.' Similarly they found for that the pension, which excludes 'housing wealth' from the assets test, the effect of pensions and benefits on inequality was 18.9 per cent smaller 'when housing income is included'. 'Overall, the combined impact of income taxes and pensions/benefits on inequality is 26.7 per cent lower when we include income from the family home,' they wrote. Prof Siminski and Prof Wilkins argue that, overall, these tax concessions may increase house prices and encourage 'inefficient allocation of resources'. They suggest that this 'tax-free income from investing in owner-occupied housing' — which is not actual cash but 'imputed' rent and unrealised gains — could instead be invested into private businesses, 'stimulating entrepreneurial activity and lifting productivity, wages and profits'. 'We know of no recent studies that have estimated the size of this effect, but it is likely to be large and therefore make the move into home ownership more difficult,' they write. 'The absence of recent studies may be because taxing owner-occupied housing is not seen as a politically viable option.' Reducing the incentive to invest in housing would benefit the 'Australian community as a whole' due to 'increased investment in productive activities', but renters would stand to benefit the most 'since the tax burden would shift towards homeowners'. The economists put forward several possible options for 'more fairly incorporating owner-occupied housing in the tax system', such as a broadbased land tax — supported by many economists — an explicit tax on owner-occupied housing wealth, or even a broader wealth tax. 'We should have a national conversation on whether the current tax treatment of owner-occupied housing is sensible,' they wrote. 'Moving away from complete exemption would open up opportunities for reduced reliance on income taxes and more food on the table for renters, and owners of modest homes.' Glenn Davies and Chris Evans from the UNSW School of Accounting have also argued that it is time to rethink the main residence exemption, saying both the underlying policy rationale and complex legislation are no longer 'fit for purpose'. 'Australia, like many other countries, is plagued by rising housing unaffordability and significant intergenerational wealth inequality, and the tax shelter provided by the MRE not only does nothing to alleviate these problems, it exacerbates them considerably,' they wrote in a paper for the eJournal of Tax Research last year. But the proposal has sparked backlash on social media. 'First government stopped you from getting on the property ladder by removing the bottom rungs (cheap housing),' Libertarian commentator Topher Field wrote on X. 'Now government is being urged to shackle everyone on to their existing rung of the ladder, by making it cost hundreds of thousands of dollars if you sell the family home. If you have to pay capital gains tax when you sell the family home then it will be nearly impossible to save enough money to be able to sell your house and move into a different house of the same value, let alone one of higher value.' 'Disgusting,' another user wrote. 'And confusingly, didn't they want empty nesters to downsize to make bigger homes available? This just discourages that.' Meanwhile the Australia Institute, a progressive think tank, has also called for scrapping the CGT discount as one of 'three ways Australia can tax wealth better' in a discussion paper ahead of this week's roundtable. 'Australia is a low tax country, with increasing demands for government spending,' the Australia Institute's David Richardson and Matt Grudnoff wrote in the paper released on Monday. 'Australia has a long history of taxing wealth lightly: it taxes capital gains concessionally; it does not have a wealth tax; nor does it have an inheritance tax.' They propose scrapping the CGT discount, imposing a 2 per cent wealth tax on those with net assets over $5 million, and introducing inheritance taxes on large estates. The three measures combined would raise an estimated $70 billion a year — $19 billion by fully taxing capital gains, $41 billion from a wealth tax, and $10 billion from death taxes, which were abolished in the '70s. An inheritance tax 'would need to be supplemented by a gift tax to reduce the tax avoidance that would otherwise occur if asset-holders could make large tax-free gifts in the years prior to their demise'. 'Targeted wealth taxes have the advantage of raising large amounts of revenue while only impacting the very wealthy,' they wrote. 'This is a group with the greatest capacity to pay. They are also a group that have been largely ignored by Australia's current tax system.'
ABC News
7 days ago
- Business
- ABC News
Australia is now a 'home owners' welfare state', and income inequality is worse than we think
Australia's income inequality is much worse than we think because official statistics ignore the income that home owners derive from their properties, leading economists say. New research finds Australia's extremely favourable tax treatment of owner-occupied housing is fuelling the problem, encouraging Australians to plough money into housing at the expense of everything else — leaving those without housing even further behind. Professor Peter Siminski from UTS Sydney, and Professor Roger Wilkins from Melbourne University, say standard measures of income inequality fail to properly capture what is happening in Australian society. A new paper from the economists considers the untaxed income owner-occupiers get from their homes, via "imputed rent" — the value of living in your own house without paying rent — and capital gains made when the home's value rises. They show that when imputed rent and accrued capital gains are included in the income measure, inequality is higher, and rising more significantly, than official statistics suggest. The research, using Household, Income and Labour Dynamics in Australia (HILDA) data, highlights that while the average annual disposable income of outright home owners in Australia is 34 per cent higher than renters — when housing income is also counted — it is 86 per cent higher. The professors say that, since income from investing in owner-occupied housing is tax-free in Australia, while all other investments attract tax, Australians are encouraged to pour money into housing instead of more productive investments. That boosts demand for housing, and lifts housing prices, which makes it harder for younger people to break into home ownership, while widening Australia's wealth divide and making income inequality worse. They found the tax-free status of housing makes our income tax and transfer systems much less redistributive and progressive than we think, too. "Owner-occupied housing is the elephant in the room in current debates," Professor Siminski told ABC News. "No-one really seems to be willing to discuss it in current debates about tax reform and our standard studies of income inequality don't really do justice to the role of owner-occupied housing." Professor Siminski and Professor Wilkins have written an article for The Conversation, published today, that explains their paper's findings. They say the size of tax concessions for owner-occupied housing in Australia is similar to the huge tax concessions for superannuation and far larger than for investment property. However, far more public attention is paid to the much smaller tax concessions for investment property income. In the past, Australia was famously described as a "wage earners' welfare state," but Professor Siminski says that version of Australia has disappeared. Treasury estimates it forgoes $50 billion a year in revenue by exempting owner-occupied housing from the Capital Gains Tax (CGT). "There is also no tax on the rental value of owner-occupied housing, although we did tax such "imputed rental income" between 1915 and 1923," Siminski and Wilkins write in their Conversation article. In their paper, they argue that the favourable tax treatment of owner-occupied housing is "a major driver of inequality, undermining the redistributive role of government". For example, they say Australia's progressive personal income tax system helps to reduce income inequality by applying higher tax rates to people with higher incomes. But when looking at long-run income trends(over 23 years), they estimate that the "redistributive impact" of Australia's income tax system is reduced by 40.5 per cent when income from the home is included. They say the redistributive impact of government transfers (welfare payments) is reduced by 18.9 per cent, because the home people live in is generally excluded from assets tests, such as to access the Age Pension. The effect of including housing income is big enough to shift Australia's inequality from 16th to 10th highest amongst OECD countries (without conducting the same exercise for other countries). Australians instinctively know how important it is for their long-term welfare to try to secure a home under Australia's current system. Cameron Spedding bought his first unit two years ago when he was just 23, something he knows is unusual for people his age. "It was a bit of hard work and a bit of luck," he said. He paid about $270,000 for a two-bedroom villa unit in the regional Victoria town of Ballarat after accessing a Victorian government first home buyers scheme. "I was able to get this place with only a 10 per cent down $30,000. It took me about 18 months of strict budgeting to save up $30,000." The 25-year-old auditor has struggled with rising interest rates and consumer prices since buying the property. "In the short term, it's been quite rough," he says. But in the long run, he is confident the financial pain will pay off. He says the value of home ownership was instilled in him early. There is one particular story that his mother told him as a boy that has stayed with him. "When my mum was a bit younger than [I am now] she was already married and had two kids and she was working at a petrol station with a woman who was nearing retirement," he says. "And my mum once asked this lady why she was still working instead of retiring, and the woman said, 'Well, because I had to rent a place. I need to pay rent each week.' Cameron says everyone should have the chance to buy their own home and wants to see more government action on affordable homes. But he does not agree with taxing owner-occupied properties. "I don't think that's necessarily going to help with anything in particular. I already kind of pay an owner-occupied tax in the form of [council] rates," he says. "I'm very fortunate here in Ballarat — they've announced rates will not be going up this year — but to have rates and a tax, it just kind of feels redundant, especially given there are what feels like a lot of different things that could be done in order to address the issue." Australia's record-high property prices, and declining rates of home ownership, have also raised concerns about the reality of more Australians becoming "forever renters" and struggling with long-term housing insecurity. It is another thing on the minds of younger Australians. Kieran Murphy, 25, has followed the advice given to his generation — go to university, get a well-paid job — but he is unsure if he will ever own a home. "I've tried to make smart decisions — I went and got a degree, I got a job in a niche field within my degree, one that pays well — and I'm still unsure whether or not I'll be able to save enough to get a home in a reasonable time, or at all," he told the ABC. "I worry about what that means for my future, how much money I'll be able to save long term. "I worry about what happens if I can't save long term — if, say, my dog had an injury or suddenly fell ill and I needed to pay a large amount to help them out, or if there was a medical emergency with my partner and I. "It's frustrating and it's scary." Saving is about to get even tougher for the oceanographic technician and his two housemates, who will soon have to move out of their below-median price rental. "I think from what I saw the other day, the median price was about $720," Kieran said. "The areas we've been looking — which are areas that are kind of in between where I work, where my housemate works and where my partner works — are all looking at minimum $600 to $700 a week. So it's less than ideal. "I'm very fortunate that I work full-time and I can afford to rent in the market, but it means that my savings and how much I can save each week will drop dramatically. Despite his concerns as a renter, Kieran is also against taxing owner-occupied homes. Instead, he says the federal government should target investors who own large property portfolios. "I'd like to see changes… where the people that have the money to buy multiple properties and develop a portfolio — that's disincentivised for them to want to do that. "I don't know many people my age who own homes, but I can think of a lot of people who are maybe double my age or so that own multiple homes — and they don't need them. Some of them don't even rent them out," he says. Professor Wilkins, who is a co-director of the HILDA survey, says many Australians do not like the idea of taxing the family home. But he argues that if the tax treatment of housing was reformed, the Australian community as a whole would benefit. It would open up opportunities for significant tax cuts in other areas of the economy. He says there are plenty of ways to fairly incorporate owner-occupied housing into the tax and transfer systems. He says a broad-based land tax would be economically efficient (it is advocated by many economists). An explicit tax on owner-occupied housing wealth would be justifiable. A broader wealth tax could be considered. He says there is a strong case for reconsidering the exemption of housing from pensions means tests, because many wealthy retirees benefit from public pensions that are funded by taxes on the incomes of renters. But he admits the politics of those kinds of tax reforms will always be difficult in Australia. "Most renters aspire to be home-owners, so they're probably thinking that if they're to achieve that aspiration, increased taxation of owner-occupied housing might seem like it's putting up further barriers to home-ownership for them," he told the ABC. "But we would actually argue that it would help moderate house prices and probably help more people get into home-ownership than it would hinder. "I think there's also an inherent scepticism about new taxes because it sounds like we're just going to be paying more tax, and of course … [when] bringing owner-occupied housing into the tax system, you'd want to be accompanying that with offsetting tax reductions elsewhere, and we're particularly thinking here about income tax, where we seem to be unduly reliant on income taxes in Australia and that puts a very high burden on younger working-age people. "So, perhaps if people were presented with that sort of trade-off, you may get a different response, if they could see — and be confident — that income tax cuts would be accompanying the introduction of taxes on housing wealth in some form," he says. He also says his main concern is about the $50 billion of annual tax concessions on Australia's owner-occupied housing is about their efficiency, rather than their distributional impact. "As an economist, I think it's really distorting our investment behaviour towards what is essentially a non-productive investment," he says of the tax-free status of owner-occupied housing. "We're much too obsessed with investing in property, either our own home or as an investor, and not sufficiently interested in investing in creating new businesses and undertaking entrepreneurial activities. "I'm always struck by this huge cultural difference between the US and Australia, where in the US people talk about creating wealth by creating a new business and coming out with a new product. "[But] in Australia the culture seems to be much more oriented around buying your next property or upgrading your existing property as ways of accumulating wealth."
New York Times
10-07-2025
- Politics
- New York Times
It's Time to Let Go of ‘African American'
I'm no fan of performative identity politics, and I think racial preferences are long past their expiration date. Yet I don't think the New York City mayoral candidate Zohran Mamdani did anything wrong when, as was reported last week, he checked off 'Black or African American' on a college application. As a man of South Asian descent who spent the first part of his life living in Uganda, he was within his rights to call himself African American. The problem is that the term appeared on the application, or anywhere else. Plenty of Black people have never liked it, and ever more are joining the ranks. It's time to let it go. 'African American' entered mainstream circulation in the late '80s as a way to call attention to Black people's heritage in the same way that terms like 'Italian American' and 'Asian American' do for members of those groups. The Rev. Jesse Jackson encouraged its usage, declaring: 'Black does not describe our situation. In my household there are seven people and none of us have the same complexion. We are of African-American heritage.' In 1989 the columnist and historian Roger Wilkins told Isabel Wilkerson: 'Whenever I go to Africa, I feel like a person with a legitimate place to stand on this earth. This is the name for all the feelings I've had all these years.' Since that time, the United States has seen an enormous change in immigration patterns. In 1980 there were about 200,000 people in America who were born in Africa; by 2023 there were 2.8 million. So today, for people who were born in Africa, any children they have after moving here and Black people whose last African ancestors lived centuries ago, the term 'African American' treats them as if they are all in the same category, forcing a single designation for an inconveniently disparate range of humans. Further complicating matters is that many Africans now living here are not Black. White people from, for example, South Africa or Tanzania might also legitimately call themselves African American. As for the community that Mamdani grew up in, it dates back to at least the late 19th century, when South Asians were brought to Uganda to work as servants for British colonizers. 'Mississippi Masala,' the movie for which Mamdani's mother, the filmmaker Mira Nair, is perhaps best known, tells the story of South Asian Ugandans expelled from the country in 1972 by the dictator Idi Amin. Feeling just as dislocated from the only home they had ever known as I would feel if expelled from the United States, they would be quite reasonable in viewing themselves as African Americans after settling here. A term that is meant to be descriptive but that can refer to Cedric the Entertainer, Trevor Noah, Elon Musk and Zohran Mamdani is a little silly. And not just silly but chilly. 'African American' sounds like something on a form. Or something vaguely euphemistic, as if you're trying to avoid saying something out loud. It feels less like a term for the vibrant, nuanced bustle of being a human than like seven chalky syllables bureaucratically impervious to abbreviation. Italian Americans call themselves 'Italian' for short. Asian Americans are 'Asian.' But for any number of reasons, it's hard to imagine a great many Black Americans opting to call themselves simply African. Want all of The Times? Subscribe.
New York Times
04-07-2025
- Politics
- New York Times
Making the Bill of Rights Relevant to Young Readers
REBELS, ROBBERS AND RADICALS: The Story of the Bill of Rights, by Teri Kanefield; illustrated by Kelly Malka Nearly daily, the front page of The New York Times is filled with the clash between an expansive executive branch and the responses of an embattled judiciary. Yet for many young people the most compelling current events are the swells and trends of the digital world. In 'Rebels, Robbers and Radicals: The Story of the Bill of Rights,' Teri Kanefield sets out to reveal to those screenagers the architecture of laws and beliefs that undergirds this nation. Can she engage her readers and prove that a 234-year-old document matters to them? Yes. Kanefield is a lawyer and an accomplished children's nonfiction author. When her editor suggested a book on the Bill of Rights she found the prospect daunting, until she 'hit on the idea of presenting the material the way the law is presented to law students — through actual court cases.' For each of the 10 amendments, she shares individuals' personal stories and legal conflicts, and shows how they shape or reflect the terms and principles of the amendment. Kanefield recognizes the 'paradox of liberty,' quoting the Lyndon B. Johnson-era assistant attorney general Roger Wilkins on framers who 'celebrated freedom while stealing the substance of life from the people they 'owned.'' Her book looks at the Bill of Rights in the context of real people with complex motives in challenging times. The Bill of Rights was created to address the founders' determination to restrain the reach and power of a central government, as well as states' rights advocates' demand that such a bill apply only to federal law — leaving states 'free to enact any laws they pleased, including laws that allowed enslavement.' Why is it, then, that the rights enshrined in the bill are applied so broadly today? Kanefield describes the shift, after the Civil War, when the expansive 14th Amendment was ratified, guaranteeing 'equal protection of the laws' throughout the country. As she demonstrates, this incorporation of the original bill into a national framework was truly a 'second founding' of the nation. From high-concept legal theory, Kanefield moves quickly to the amendments. She approaches the First Amendment and free speech through the Peter Zenger case in colonial New York — when British libel law did not allow truth as a defense. Just as a manager will be thrown out of a baseball game for arguing balls and strikes even if the umpire is indeed blind, Zenger was on trial in 1735 for defaming a corrupt official by printing a newspaper article that said he was corrupt. The local jury ignored the law and took his side — as does the later ratified First Amendment. What, then, are the limits on speech? Want all of The Times? Subscribe.
