Australia has commenced its fourth election campaign in a decade of political volatility. It’s hard to predict who’ll win or the deciding factors but one theme has already emerged – how the tax burden and government benefits are allocated, or what the media calls “class warfare”.
This theme plays out in the opposing policies on negative gearing and capital gains tax (CGT). Labor will eliminate negative gearing on existing properties and increase CGT, saying current concessions benefit the rich and make home ownership harder for young people. The Coalition says three quarters of people who negative gear earn less than $80,000 p/a and Labor’s policy will reduce house prices and rental property availability.
This debate also highlights the widening gap between the Left’s perception of working class people and the reality.
Left-leaning ABC radio host, Jon Faine, recently complained to Malcolm Turnbull that his kids are locked out of the property market. Turnbull replied: "Well you should shell out for them. You should support them, a wealthy man like you … you can provide a bit of inter-generational equity".
It’s true, Faine is wealthy. Freedom of Information data from 2013 shows his taxpayer-funded salary was $300,000 p/a. Many would agree he should help his kids rather than complain. Yet Turnbull’s comment sparked Outrage amongst the twittering classes. The media called it a gaffe.
They’re out of touch. All over the country Australians are helping their kids and grandkids buy property - through bank guarantees, putting their own home up as security, helping raise a deposit and providing rent-free accommodation. Especially working class people.
Politicians like Hawke, Keating and Howard understood working class aspirations; the desire to see your kids do better than you and help them do it. And they understood how working class people rely on home ownership to drive these aspirations.
That’s my family’s experience. We were the poorest of the working class, an Aboriginal family from regional Australia. My father was a grader driver; my mother, a domestic. Their first home was a tent on the Mann River near Grafton. They later bought a house in South Grafton, borrowing from a moneylender at usury rates.
My parents had 11 children. The house had 5 rooms – my parents’ bedroom, my sisters’ bedroom, a dining area, a small room for my grandparents, and a laundry with a bath. My brothers and I slept on the verandah, four per single bed.
In the 1960s we moved to Auburn in western Sydney. I moved out as a teenager and soon became a parent myself. Initially in public housing, I also wanted to buy a home. With help from my parents and in-laws, I saved a deposit labouring by day, bartending at night and doing odd jobs on weekends. Eventually I got a clerical job at the Tax Office.
I bought my first home for $34,000 in 1979 in St Marys, 50km from the CBD and 3 hours’ daily commute. Six years later I sold it for $51,500. Home ownership helped me get ahead. Today the same house is worth 10 times more, illustrating just how much property has helped people from working class suburbs build wealth.
Home ownership is the great Australian dream. That now includes owning investment property which many people use as a stepping stone to home ownership. And for every ordinary person who invests, many more aspire to.
So what if negative gearing benefits high earners more in absolute terms. High earners contribute most of the tax – 50% of income tax comes from the top 10% of earners; a staggering 84% from just 20% of working people (those on more than $80,000 p/a). The value of a tax deduction correlates with how high your tax rate is. Of course those who pay the most tax get the most deductions.
This argument misses the point. Working class people don’t particularly care that someone else earns more money or gets more deductions. The people I grew up with didn’t focus on who had more. We focussed on getting ahead ourselves. The working class ethic isn’t about jealousy or feeling entitled to something from someone who has more than you. It’s about hard work, self-sufficiency and providing for your family, not relying on handouts.
If the Left really care about rich people getting concessions, why don’t they oppose free health care for millionaires; or wealthy parents sending kids to public schools for free? Maybe because Left ideology isn’t grounded in “fairness” at all, but in socialist principles that no one should get more - or do better - than anyone else and government should counteract it if they do.
Of course Australians want a fair society. This includes a fair opportunity to get ahead without government stopping you. Negative gearing is the sleeper issue of this campaign, one that won’t work in Labor’s favour in marginal seats.
This article was first published in the Daily Telegraph, the Herald Sun, the Adelaide Advertiser and the Courier Mail on 12 May 2016
Class warfare will misfire
12 May 2016
By Nyunggai Warren Mundine