Why has Australian Treasurer & Liberal MP for Kooyong Josh Frydenberg morphed into a frenzied Trump?

“Ultimately, a dollar of tax avoided by high income Australians is an extra dollar of tax paid by all other Australians.” [Australian Labor Party (ALP) policy document Positive plan to help housing affordability]

The Australian Labor Party has put forward a number of policies which limit the degree to which affluent groups in our society can manipulate the tax system.

These tax reform policies will:

* limit negative gearing to investment properties already negatively geared and newly built residential housing. However net income losses on existing negatively geared properties will not be able to be used to offset salary & wage income;

* cease cash refunds for excess dividend imputation credits on which the investor personally paid no tax originally and who has no current tax liability to offset with these credits;

* reduce the discount on capital gains tax from 50 per cent to 25 per cent after the deduction for any capital losses. Some assets and events are exempt from capital gains tax. These include selling your principle home, personal car, personal use assets or selling an asset acquired before capital gains tax was introduced on 20 September 1985. 
According to the Australian Taxation Office if you are an individual rather than a corporation then the Capital Gains Tax Rate is the same as your Income Tax Rate in the applicable year.

These same policies have caused former Deutsche Bank director, current Australian Treasurer and Liberal MP for Kooyong Josh Frydenberg (left) to morph into a frenzied Trump. Pumping out slogans, misrepresentations and sometimes downright political lies on every media platform he can access.

The Australian, 5 December 2018, p.2:

Josh Frydenberg has launched a pre-election assault on Labor’s plan to halve the capital gains tax discount, warning that hundreds of thousands of Australians will be taxed at the “highest rates” in the Western world.

Shifting his focus from Bill Shorten’s proposal to limit negative gearing to new dwellings and the “retiree tax”, the Treasurer yesterday cited government analysis that showed Australians would be taxed up to 36.75 per cent on their capital gains under Labor’s policy, up from 23.5 per cent now….¹

Labor’s 50% increase to capital gains tax will cost jobs, punish those who work hard and save, and give Australia a CGT rate much higher than other advanced economies. pic.twitter.com/W4c3pgcgCt

— Josh Frydenberg (@JoshFrydenberg) January 4, 2019

.@JoshFrydenberg on Labor’s negative gearing: Everybody who owns equity in their home will be worse off under Labor’s policy.

This is a major tax grab by the Labor Party.

MORE: https://t.co/9fyClHfMTo #FirstEdition pic.twitter.com/H0H0WTtFV5

— Sky News Australia (@SkyNewsAust) November 6, 2018

So why is Frydenberg screaming misrepresentations at the top of his lungs, urged on by the Housing Industry Association?²

Could it be because 56.2 per cent of the tax benefits from Negative Gearing go to individuals whose incomes are in the top 20 per cent of Australian incomes and only 5.2 per cent of the tax benefits go to individuals in the lowest 20 per cent of incomes?

Or because est. 75 per cent of tax savings from Capital GainsTax discounts go to the top 10 per cent of high income families?

Perhaps it’s because Self-Managed Super Funds are a major beneficiary of cash refunds for excess dividend imputation credits, with 50 per cent of the benefit to SMSFs accruing to the top 10 per cent of SMSF balances and some funds receiving cash refunds of more than $2.5 million a year?

Likely he’s screaming because all three instances represent how successfully the affluent have gamed the tax system to date and he like most right-wing politicians see such tax manipulation as a right belonging to them and their mates and, therefore have no interest in supporting a fairer distribution of the tax burden.

He also appears to be ignoring the fact that Treasury modelling of these Labor policies shows an increase in federal government revenue by $2 billion over time and, that these same policies have the potential to put downward pressure on property prices in the short-term so that genuine first home buyers might get a foot in the door with more affordable residential housing.

Bottom line is that Labor’s tax reform policies are primarily targeted at investors with a marginal tax rate (including Medicare Levy) of over 45 per cent - which roughly equates with the top 20 per cent of Australian residents with private wealth.

That is, the 'professional' investors/tax avoiders amongst the 1.16 million Australians who according to Credit Suisse in 2017 are millionaires, some many, many times over.

Footnotes

1. KPMG, Demark- Taxation of investment income and capital gains: “Interest and rental income are taxable as investment (or capital) income with a marginal tax of 42 percent (2018).” Denmark's Capital Gains Tax Rate is higher than the worse case scenario of up to 36.75 per cent under Labor which Frydenberg postulates in Para 5 of this post. Therefore Labor would not be imposing "the highest" rates in the Western world'.

2. Australian Government, Treasury, Tax- Negative Gearing/Capital Gains, FOI, 5 January 2018.

    Shadow Treasurer Chris Bowen, A FAIRER TAX SYSTEM: DIVIDEND IMPUTATION REFORM, 13        

                      March 2018.

    Australian Taxation Office,  Individual Income Tax Rates 2018-2019 and CGT assets and exemptions
    National Australia Bank, Calculating and Paying Capital Gains Tax, 
     Domain.com.au, The ‘little known’ tax strategy some millennials use to amass large property portfolios,           23 May 2016.

* Photograph of Josh Frydenberg from msn.com