There are few feats of human biomechanics as impressive as watching an Australian politician flee from the suggestion that he or she might demote the family home from its privileged position in our tax, social security and economic policies.
Social Security Minister Scott Morrison — so hardnosed and ruthless toward asylum seekers — set a new landspeed record this morning in distancing himself from a news report that suggested the government might consider adding the family home to the aged pension means test.
The political reality that sends even the bravest minister into retreat with, to mangle Chariots of Fire, dread in their hearts and wings on their heels, reflects the extent to which property and “the family home” (not merely the home, but the family home) are embedded in the Australian psyche and our economic view of the world. Our entire taxation system privileges home ownership and investment in a way that generation after generation of economist has explained is deeply distorting of our economy. Similarly, our aged pension system rewards those who have stored wealth in their homes, often homes long since grown far beyond the needs of their residents. It’s a perfect symbol of the way the Australian economy overinvests in real estate at the expense of more productive investments in business activity and infrastructure.
As Morrison’s example demonstrates, it’s difficult for a politician to even start a debate on this distortion without the worry that they’ll go to the next election facing a scare campaign about pensioners forced to sell their homes or face accusations they want to tax the windfall gains Australians who own urban property make from the property market.
Perhaps as a first step, the government could refer the issue to the Productivity Commission, which is now the go-to institution for what might be called “policy laundering” — getting a potentially controversial policy into public debate without being politically connected to it. But one way or another, challenging the dominance of the “family home” in voters’ minds should make its way onto the agenda.
So… if I have very little money for my old age, where do you suggest I live after I have to sell my house in Sydney because it’s “too valuable”? Are all old people meant to move somewhere where real estate is cheap? And where would that be? Certainly not in Sydney. You come out with a sweeping statement with zero explanation. You sound like a Hockey budget.
There was a time when I sat in ALP Branch meetings demanding as much taxing as possible on those owning family homes, because few of them owned their homes, just as they supported death duties because few of them expected to receive significant bequests.
All that changed with rising the rising affluence of the late 50s.
Evolution hasn’t managed too well as our species got its hands on more and more goodies, and even politicians who know changes should be made don’t dare make the natives restless.
I think there is some validity in excluding the family home but perhaps there can be a cap in the value
So… if I have very little money for my old age, where do you suggest I live after I have to sell my house in Sydney because it’s “too valuable”?
This is a specious but predictable argument, so the most pragmatic solution is simply for the Government to run a reverse mortgage-type scheme on your house so you can pay your bills without having to move out.
Land taxes are amongst the best taxes known. They are efficient, have very little distorting effect and are extremely difficult to avoid.
drsmithy, your suggestion is an excellent and obvious measure; but an extremely generous equivalent has operated in NSW for half a Century, and all the while the extremely wealthy have bleated ceaselessly about how “poor” pensioners such as themselves are being treated shamelessly by ‘heartless’ governments.