By Viv Forbes
Governments seek to revive “the economy” by scattering gifts of our own money wrapped in red tape. This encourages immediate consumption. But this stimulation stops dead when the money tap is turned off.
Three simple measures from the three levels of government will create more long term jobs than discriminatory and complicated political handouts that have no lasting effect.
Firstly, abolish the federal Capital Gains Tax. Fear of CGT has constipated private property transfer and investment for decades.
Most new investors in houses, businesses or farms soon start making improvements – alterations, extensions, a granny flat or new sheds, yards, dams, fences, factories or workshops. But after a few years, owners become satisfied or inactive and capital expenditure dries up. Often they would like to move on but they fear CGT punishment if they sell. Abolish the CGT and its complicated rules and many owners would upgrade to a new property or business and both old and new properties are likely to attract a new cycle of investment and renovation.
Making all capital expenditure immediately deductable for tax in all industries would also accelerate re-investment. We would hear the hammers starting within days (as in post-war Germany when Ludwig Erhardt set their beaten people free of tax).
Secondly, State governments can accelerate economic rejuvenation by abolishing stamp duty, which is a tax on those who do things. New Zealand abolished stamp duty twenty years ago and the sky did not fall.
Thirdly, local governments can help with a six-month rates holiday for all rate payers in shires suffering from fires, flood, drought or corona-virus depression. The feds should fund this.
Giving an allowance to people who are forcibly quarantined is reasonable. But most people don’t want a handout – they want a job.
We don’t want governments scattering our own money like confetti – we want conditions that encourage people to invest more of their own money in creating real jobs.
Further Reading:
Some of the CGT Red Tape in Australia:
https://www.ato.gov.au/General/Capital-gains-tax/Your-home-and-other-real-estate/Your-main-residence/
Viv Forbes BScApp, FAusImm, FSIA. Viv has been a director of several companies and studied financial analysis, business economics and politics.
Capital gains tax is justifiable, but it should take inflation into account. This need not be complicated; the ATO could each year publish a simple table that tells people what percentage of their gross capital gain to declare as taxable income, based on which previous year the asset was acquired.
Stamp duty on house purchases is far more pernicious.
If it can’t be abolished, then don’t levy it up front as a cash payment, simply treat it as a second mortgage.
Whatever reforms are contemplated always “game play” the proposed scheme to see out how it could be rorted by smart, greedy, ruthless people.
Add the removal of payroll tax too.