Australia's housing crisis sparks a neo-feudalism warning.
A stark warning has been issued by a prominent tax expert, claiming that Australia's housing wealth boom is steering the nation towards a neo-feudal society. This means your financial success could significantly depend on whether your parents own property.
Bob Breunig, director of the Tax and Transfer Policy Institute at the Australian National University, believes this trajectory is a real concern. While acknowledging that the situation isn't as dire as pre-French Revolution times, he worries about the growing wealth gap.
The issue isn't solely about the young versus the old, as commonly perceived. Breunig explains, "If you're young and your parents are wealthy, you'll inherit their assets. So, the true inequality lies within generations, between those with assets and those without."
Breunig's report highlights how the tax system has favored older Australians over time. He clarifies that the aim isn't to penalize seniors but to create a fairer system. "We aspire to a nation where the elderly thrive, encouraging hard work and savings throughout life."
However, the tax system hasn't adapted to modern times. Breunig notes, "Historically, being old meant being poor, so we provide substantial support to the elderly. But many seniors are no longer in poverty, yet we continue to offer the same level of assistance."
The focus shifts to targeting aid to those genuinely in need. The committee, led by the Greens, has scrutinized the 50% capital gains tax discount, believing it worsens the housing affordability crisis by encouraging speculative investments in residential properties.
Union leader Bill Kelty urges the government to implement a bolder reform agenda to inspire hope in younger generations facing alienation. While tax experts agree that reducing investor tax breaks might not significantly impact house prices or ownership, it's a step in the right direction.
Breunig argues that the capital gains tax discount isn't exceptionally high globally. He cautions that changing it only for new investments could worsen intergenerational inequality. "By doing so, you're depriving the younger generation of benefits accessible to the older generation."
The real problem, according to Breunig, is the substantial under-taxation of family homes and superannuation. Conversely, Bernie Fraser, a former Reserve Bank governor, advocates for abolishing the capital gains tax discount, predicting a more significant impact on house prices than the estimated 1-3% drop.
