9 minute negative gearing
For my class Rhetoric & Practice, I had to write and perform a 10 minute pursuasive speech on a topic of choice. I chose the rivetting topic of negative gearing…
Ah yes, it was what some of you some of you were fearing,
I am indeed going to be discussing negative gearing.
My proposal is simple, this is something we need to address
It’s a policy of idiocy that’s left the housing market a mess.
But, bloody hell, what does it even mean to negatively gear?
Well, tune in all, I hope to make it (somewhat) clear -
Do not feel bad if you don’t understand right away
It’s an area that’s murky, it’s 50 shades of grey
In fact, to that end,
it’s power lies in that it’s tricky to comprehend.
Like tax, accounting and the end of financial year
It’s something that makes us shudder, it’s something we fear.
I hope to show you, that indeed it’s confusing
and that’s why it’s something so open to abusing.
It’s a rort
Allowing those who are rich to make obscene amounts from the houses they’ve bought.
Let’s make it simple and go to the facts
Negative gearing is a means of avoiding tax
Imagine you have a house and you buy yet another,
But to pay the mortgage cost is something you can’t quite cover
So you’re running the property at a loss, but you know
It’s ok because you can deduct those losses from the ATO
Yes what is lost through the difference in mortgage and rent income,
Can be offset against the personal tax for some
A bit like being able to offset business expense
Only you’re not really contributing to the job market in any meaningful sense.
So Hang though, listen, what in that is fair you profess?
Someone renting pays normal tax, but the one with two houses pays less?
A man with capital can buy place after place,
Knowing that negative gearing is his saving grace
Ordinarily he wouldn’t, but now that he can,
All the houses are for the taking for that rich man.
Yeah so OK, it seems a little unfair, is that all?
When put like that the problem sounds a little small.
Well no, the effects are far more nefarious
This policy leaves the young, renting and precarious
Because, please see,
When you think about it logically
If money is your sole intent,
and you can run a loss on all houses you rent
Then people they continue to buy and buy
Without hearing us millenials cry
Goddamnit how can we afford a place?
When the housing market has skyrocketed to outer space
We don’t have the thousands to secure a loan
So instead we’ll be in our 30s still living at home.
You might ask, is that really that bad?
Yes living with your parents that long gets rather sad.
Ok let’s pause and now For the sake of brevity,
From henceforth I’ll shorten Negative gearing that term to NG
So, hang on, how can it be?
That costs have rocketed because of NG?
Here’s where I’ll take you on a trip down memory lane,
And discuss a bit of history so that I can get to the main -
point which is that in the of the mining boom
when the economy wasn’t all shrouded in gloom
back in the era of Howard’s 11 year reign
When he and Costello decided that the share the mining boom gain,
They’d lower taxes across the board,
Because at this time you see, it was something “that we could afford”
So capital gains that tax was cut drastically
Which, for inviestors, was fantastically -
great now there was more of a reason to by a place not live
but to rent and sell, so if gains were low, then “oh well”
Buy a property for 5 years, let it appreciate
Sell it on for a massive profit now “won’t that be great?’
But this, in conjugation with good old NG,
Sets us on a path to living somewhat dangerously
If people buy just to lease
And to make more and more
Most are blocked out and that leads to furore.
There’s a point on which, Negative gearing relies
That is the belief that house prices will only rise
But with interest rates at an historic low,
There must be a point when the housing market will slow
And if the market does crash,
It’ll seem rather rash,
To have so many properties owned by those without the proper cash
So I hope you see, that it’s not just about you and me
Not only do the young loose,
But in the long run,
Negative gearing stuffs up everyone
According to a liberal MP property speculation
is “a fundamental of Australia’s wealth creation”.
And from that you think, didn’t he see?
That’s sort of what lead to the the GFC?
Keeping the status quo is something for which real estate agents fought
And you can’t help but wonder, have they even seen The Big Short?
After changes to capital gains tax or CGT,
It became more attractive to make a loss on your property
Cutting capital gains and adding in NG is a tax avoidance scheme
And overall changes the meaning of the “great Australian dream”
One house for one family, why do we need that?
When investors can make millions at the drop of a hat
Indeed, According to the Reserve Bank, Australia is pretty much alone,
When it comes to desiring making a loss off renting a second home
Income from rent is the norm elsewhere,
But in Oz, not enough people seem to care
That the way things are set up is totally insane,
And it’s something that we simply cannot maintain.
Up until now I’ve largely said that the system is not fair,
But if you’re not lefty then why should you care?
Well even for those who see themselves on the right
You’d have to admit that the market might
Just be severally distorted, although it’s underreported
That these policies, don’t a free market benefit
And that’s just the beginning of it.
If you’re conservative and you believe less that the government should intervene
Then surely you’ll get just what I mean
The changes in the 90s have made the market a mess
And they encourage a really poor way to invest
Besides we know that we’re nearing trouble,
What happens when we see the bursting of this housing bubble?
But what about revenue, this is something Australia lacks
And evidently we need to raise some kind of a tax
As it stands we could reap MILLIONS from cutting this loophole
There’d be more money for medicare, education and the dole
“We’re not living within our means” we’re continually told
Yes financing several properties with debt is a little bold
We don’t have to tighten our belts or decrease health spending
Really it’s negative gearing that we should be ending.
Yes it’s something we ought to cease
Who wants to go down the same path a Greece?
Yes their case is more extreme and not quite the same,
But their inability to tax houses properly was also partly to blame
Guess how many billions WE loose each year,
To those people able to negatively gear?
According to the Grattan Institute its FIVE that we miss
I mean 5 billions dollars, surely that’s taking the piss?!
When the market is distorted and the benefits flow to the top
You know it’s not durable it’s something we need to stop
Where do the benefits go, well I’ve you some stats
68% of the befit goes to the fat cats
That’s the top 20% receiving the majority of gain,
The top 10 receive 47% now — between you and me — thats just insane
Another thing we cannot forget
Is that this policy leads to rising personal debt
In Australia we think we’re incredibly wealthy
But really our economy isn’t so healthy
We’ve the highest levels of personal debt worldwide
and yet we’re still unable to decide
The proper way to have a debate
on How we ought to regulate
a housing market that’s perpetually on fire
and near impossible to enter for a the first home buyer.
Because What happens when you can’t buy a place because they’re priced more than their worth?
Will all of us Melbourne millennials have to cross over the Perth?
Because really I don’t want to live far from a real city
It’d be nice to exist in a suburb that’s relatively pretty
It’s ok to be far from town, to live at the end of the line,
A house near amenities, well that’s just fine
But really the reason why we complain,
Is we couldn’t afford such place, not Frankston, Werribee or even Alamein
Now I realise that there are a few myths that need to be bust,
If I am to gain everyones trust
There is this really annoying pervasive belief
that these policies allow for rental relief
According to some rents are something we can afford
Because of the NG adopted by your land lord
In fact it’s bollocks, it’s a lie
It’s a claim on which the fear mongers rely
You see we’ve abolished NG before
Between 1982–1990 rental prices to not soar
They went up somewhat in Perth and Syd
But go up everywhere else is not what they did
And for those two cities there were other factors at play
So to blame the abolition somewhat disingenuous to say
Why doesn’t it change the average cost of rent?
Well the problem is that people are buying existing houses as an investment
So the overall stock that’s — every singly rental dwelling
Wont increase much When it’s just investors buying and selling.
And few investors are much of a fan
Of buying new houses straight off the plan
So I really hope you’ve following and I do apologise
You might think that discussing taxation is not all that wise
But I believe in making things fair and that’s why I believe we should be cheering
A old good hard reforming of negative gearing.