It’s likely the negative gearing debate will rage at least until the election in July.
So here’s another way of looking at the argument…
The truth is the relative benefits of negative gearing are greatest at low income levels, Michael Potter a research fellow in the Economics Program at the Centre for Independent Studies wrote on the ABC.
Of course that’s contrary to what most people believe.
Those against negative gearing argue we should get rid of negative gearing because it provides a greater benefit to the rich than the poor.
Yet according to analysis by the Centre for Independent Studies (CIS) the largest relative benefit of negative gearing is at low income levels rather than high income levels.
In fact, the benefit is particularly substantial at low income levels.
This is shown in the graph below:
So the relative benefits of negative gearing are greatest at low income levels; but this shouldn’t determine what is done.
Much more important is the impact on the budget, the housing market and economy more broadly.
Also published on Medium.