There’s a new push to tax homeowners even more with a new taxpayer funded report coming out which is frankly an embarrassment to the authors, but we’ll get to that.

It’s claiming that we need to tax capital gains on owner-occupied homes and claims that Australia is a homeownership welfare state. Now, a report like this is what I like to call a target-rich environment. There are literally a dozen different ways to shred this and it’s vital that we do because this idea of applying capital gains tax to the family home is one of the ideas being brought to Prime Minister Albanese’s economic roundtable, where they are apparently proud of the fact that they’re bringing together the business community, union movement and civil society to work on making the economy stronger. Good. We definitely need that. Fairer. Uh, that’s usually a code word for more taxes and more welfare and more resilient, again, usually a code word for more government dependent.

This round table already rang alarm bells with things like the ACTU saying that they’re bringing a 4-day work week to the table for discussion, while others are bringing the idea of increasing the GST from 10% to 15%. And now others are planning to bring the idea of taxing the family home. Not only the capital gains tax on the family home when you sell it, which we will discuss, but there’s also talk of taxing the imputed rent, which is just a wanky way of saying the rent that you don’t have to pay because you’ve already paid your house off. And yes, there are people proposing with a straight face that you should be taxed on the rent you didn’t have to pay as a punishment for being a homeowner.

No matter how bad you think Australia is right now, rest assured that there is an army of taxpayer funded politicians, taxpayer funded bureaucrats, taxpayer funded researchers, and all of their taxpayer funded consultants and hangers-on who are working tirelessly to make it even worse. My name’s Topher Field. This is the Topher Project, and I help busy people like you to make sense of the nonsense and cut through crap like this report recommending taxing the family home. I am 100% viewer supported. I don’t get paid by the government to point out their many idiocies and epic fails. Weirdly, there’s no government grant for that. So, I depend on you, my viewers, to help me keep the Topher project going by buying me a coffee via the button at topherfield.net. And if you like my videos, then you’re going to love my books about civil disobedience in the modern age, including Good People Break Bad Laws, plus Good Christians Break Bad Laws about the theology of civil disobedience. Plus, there’s my DVD documentary, Battleground Melbourne. And there’s a range of different merch designs, some funny, some serious, all designed to spark conversation, and all available in t-shirts, long sleeve t-shirts, and hoodies. All that and more is available from goodpeoplebreakbadlaws.com. And every purchase helps me to keep the Topher project going.

Okay, let’s dive into this report and the ABC article about this report and see that these authors really are absolutely muted in the head. They spend most of the report stating the obvious. For starters, they drop the absolute bombshell breaking news. That throughout history, wealthier people have lived in larger houses than poorer people. Who knew? They go on to point out that throughout history and in fact even up to this day, people with more money and larger houses tend to get better outcomes in life than people with less money and smaller houses. I know, right? Thank God for the Australian Research Council and their $600,000 taxpayer funded grant to this research project. Without them, we might never have known that more money is a causative factor in more house. 600 grand. This report’s a bargain at twice the price.

But back to it. What is assumed into this report, although never actually justified or explained, is that these differences in outcome are assumed to be inherently bad. This is a problem that needs to be fixed. That they’re a function of inequality and proof that the government needs to do more to level things out. What they don’t seem to have researched is that just perhaps these differences in outcome actually come from differences in behavior. That maybe people who work harder or at the very least work smarter are the ones who earn more. Or that perhaps a person who is smarter with what they earn will end up with better outcomes over time than someone who earns the same amount but pisses it up against the wall. All of that is ignored in this report. There’s a difference. Differences are bad and it’s the government’s job to level everyone out. Communism 101, but that’s a video for another day.

And so we come to the recommendations from this report. Very much the sting in the tail because we can laugh all we want at the banality of their research and the obviousness of their findings. But their recommendations are no laughing matter. And the scary part is that people like these researchers and ideas like theirs are the ones that have access to the halls of power in Canberra and places like this upcoming economic roundtable. But before we get to their recommendations, I want to quickly blast the whole premise of this document out of the water. This entire report is based on the premise that Australia is some sort of hidden home ownership welfare state.

Now, this is absolutely laughable because if you’ve paid off your house, you have already paid the purchase price of your house in taxes.

What do I mean? What I mean is that by the time you’ve paid that loan off, the mortgage, etc., and you own the house outright, by that point in time, 30 years down the road, you will have also paid the house purchase price to various levels of government in taxes just on the money that you had to use to pay off that house. Follow me for a minute. Let’s assume that we’re talking about a million-dollar home, which is apparently a below average house in a capital city these days. We have to make a few assumptions about interest rates and loan terms and things like lenders, mortgage insurance, your personal income tax rate, your council rates, and more. So, this number is a little bit fudgy, admittedly, give or take, maybe 20% either side. But here’s an estimate. Million-dollar home at a high loan to value ratio with capitalized lender mortgage insurance, 5% interest rate averaged over the 30-year loan term. Rates, council rates, using Boroondara Shire as my baseline, not forgetting stamp duty on the purchase price, and assuming 37 cents in the dollar income tax bracket because you’re going to be paying off this house, presumably you have a decent income.

If we plug all of that in, then by the time you’ve paid off this $1 million house, you will have also paid $57,500 in stamp duty, another $78,000 approximately in rates, allowing for the fact that the ratable value of that home will keep going up over the 30 years, and you have to pay those taxes and council rates on top of the principal and interest repayments on the $1 million loan. Now, that principal and interest over the 30 years at 5% adds up to about $1.94 million, but this is a family home, which means that none of those costs or repayments are tax deductible. Every single dollar has to be paid with after-tax dollars. So, you’ve got to find $1.94 million in after-tax income to pay the principal and interest on the loan, plus another $78,000 in after-tax income to pay the rates, and another $57,000 in after-tax income for the stamp duty for a total of around about $2,080,000 in after-tax money to pay off and live in your $1 million home. To do that before tax, you have to earn approximately $3.3 million and pay over $1.2 million in income tax alone just so that you can have the after-tax income to pay the various property taxes and pay for the house principal and interest on the mortgage. Which means that anyone who has paid their home off over 30 years has already given the government the purchase price of the home or more in taxes. And yeah, it’ll vary from person to person. Obviously, different houses are worth different amounts. Different people have different taxable incomes. I am absolutely estimating and fudging to a certain degree, but I’m also not including a bunch of other things like, for example, any home improvements you make to your own home, renovating a bathroom or a kitchen, where you have to do all of that in after-tax dollars as well. So there’s fudge factor in both directions. I think as an estimate simply saying if you’ve paid off your house over 30 years then you’ve already paid the purchase price in taxes and that’s going to be pretty close most of the time.

So the first problem with this report is that the entire premise is stupid. The idea that you paying $1.2 million in income taxes and another 130,000 or so in other government fees and charges for the privilege of buying a $1 million home. The idea that this makes Australia somehow a hidden home ownership welfare state is just asinine. Now it is true that owning your own home ends up better for you than renting for your whole life. That’s true. But it’s also true of any and all good life choices. Investing in assets ends up better than pissing your money up against the wall. But to pretend that slaving your guts out for 30 years, paying millions in combined taxes and interest so that you can own your own home in retirement, to pretend that that’s some kind of welfare is just nuts and means that this report is flawed from its very foundation.

But let’s get to those two proposals. I’m going to start by quoting myself. Now, in my line of work, it’s generally considered poor form to quote yourself. But I found a loophole because if the mainstream media have quoted me first, then I can simply quote the mainstream media quoting me. Frank Chung wrote for news.com.au about my response to this proposal and to quote news.com.au: Topher Field said, “First, government stopped you from getting on the property ladder by removing the bottom rungs, cheap housing. Now government is being urged to shackle everyone onto their existing rung of the ladder by making it cost hundreds of thousands of dollars if you sell the family home. If you have to pay capital gains tax when you sell the family home, then it will be nearly impossible to save enough money to be able to sell your house and move into a different house of the same value, let alone one of higher value. If capital gains tax is applied to the family home, no one will be able to afford to move house.” End quote.

The authors of this report pretend that not applying capital gains tax to the family home is some kind of travesty that undoes the progressiveness of our tax system. But actually, a lot of capital gains in house values is actually just inflation lowering the value of our money. Now, I know that house prices have grown much faster than official inflation has grown, but regular viewers will know what I think of the official inflation figures. I think we need to double whatever the official number is to actually get close to the real world inflation that we all actually experience. So, the authors of this report aren’t satisfied that you’ve already paid the value of your home in taxes by the time you’ve paid it off. No, no, that’s not good enough. Now, you also have to pay for the inflation which has pushed the nominal dollar value of your home sky-high in the years since you bought it.

So, you’re going to lose something like 30% or more of the increase in value to the taxman if you sell your family home.

So, if you sold a $1 million house that you bought for, let’s say, a half a million a decade earlier or something like that, you’ll pay more than $150,000 in income tax. And now you won’t even be able to take the proceeds from selling your own home and buy an equivalent home elsewhere. You can’t do it. You either have to downgrade or you have to bring in a bunch more cash after-tax money out of your pocket to make up for the shortfall created by the taxman taxing you on the sale of your family home.

The irony of this is that it’s going to stop people from downsizing, which is going to make housing supply even worse. A significant percentage of elderly homeowners do choose to downsize at some point. By no means all, but a significant percentage do it. Freeing up their larger family home for others who are in a phase of life where they need the extra space, that bigger home. Now, these downsizers, well, they downsize because they need a smaller home. They can’t be bothered looking after the big one anymore. But actually, more importantly, they can sell their valuable family-sized home, buy a cheaper, smaller home, and keep and live off the difference, the increased value that they enjoyed in that family home. It’s a retirement plan. But if they now get taxed on that excess value, then fewer people will choose to downsize. They’ll stay in that larger house that doesn’t really suit them anymore, but whatever, it makes no financial sense for them to downsize because the tax just takes the profit.

But there is one more proposal from this report that is truly insane. The authors talk extensively about imputed rent. What they’re talking about is the fact that once you’ve paid off your own home, you don’t have to pay rent and you don’t have to pay a mortgage anymore either because, wait for it, you’ve already paid it. So, you get the value of living in your own home without having to pay for it every year because you’ve already paid for it. But they don’t really want to talk about that. They say in this report that this imputed rent, this imaginary money that doesn’t exist, it isn’t being paid by anyone to anyone, they think that that should be taxed, effectively increasing the taxable income of anyone who owns their own home. Forget taxing unrealized capital gains. These guys want to tax nonexistent income that was used to pay imaginary rent. And you know what? I’m okay with that as long as I get to pay all of my taxes with imaginary money. Yeah, that sounds good.

This is what passes for research in this country. Our taxes helped to fund this. This report is such a train wreck. I’m just going to grab a few highlights from this news.com.au article about it. And remember, this was written by university staff who received taxpayer funds for the project that this report came out of. Professor Saminsky and Professor Wilkins argue owner-occupied housing exacerbates inequality. In a draft research paper, the economists have modeled what they argue is the true picture of Australia’s income inequality by taking into account the income that owner-occupiers derive from their family home by including the imputed rental income or what a homeowner would pay in rent and unrealized gains on the value of the property. “When these are included in the income measure, inequality is higher and it increases more strongly over time,” they wrote. End quote.

Yeah, being smart with your money and planning for the future leads to better outcomes over time. These guys are literally getting mad at people for being smarter with their money and planning for their future. They go on to say, quote, “Because this income is tax-free, the average tax rate for the rich is much lower than it seems.” End quote. Except that none of this is income. Imputed rent doesn’t exist. It’s a figment of their imaginations. They’re literally trying to tax imaginary money. And capital gains isn’t income either when a large part of it is actually just inflation.

This is what passes for research in this country. And this along with increasing the GST to 15% and mandating a 4-day working week.

These are the ideas which are apparently going to be put on the table at Prime Minister Anthony Albanese’s coming talk fest. We’re in trouble. Australia is in serious trouble. Productivity is collapsing. The only growth sector in Australia is bludging off taxpayers, whether on the dole or in a public service or as in this case in taxpayer funded research. We already lose more than half of our earnings to the government in one way or another. And more than half of all Australians already depend on government income. Again, whether that’s through welfare or through a government job, it really doesn’t make much of a difference to the equation.

And all they can talk about now in the situation we’re in is finding new ways to tax us and new ways to further degrade our productivity. Now, credit where it is due, Albanese has said that this roundtable is going to be about productivity and he said that he won’t be coming forward with any new taxes and that’s great as long as he actually keeps his word this time unlike, you know, the other times. We don’t have a problem with not enough tax in this country. We have a problem with far too much waste. And maybe you think I go too far because I want to abolish red tape, abolish green tape, abolish welfare, fire 90% of the public service, and set the Australian people free to live and work and build and create a vibrant, prosperous Australia without our government holding us back.

But even if you don’t take it as far as I do, hopefully you can still see that if this is what we’re talking about doing next, then we’ve already gone way, way too far. Sadly, Albanese isn’t going to have a change of heart and cut the government down to size anytime soon. And neither is Sussan Ley, the leader of the opposition. It’s up to us, the voting public, to change the incentives, create the societal conditions and expectations that change the political incentives so that future prime ministers and future opposition leaders start to address the actual problem, the gargantuan excessive, wasteful, all-consuming size of government.

And as for this report, if I were a prime minister looking for ways to save money in the budget, I’d start by saving $600,000 by canceling whatever the hell this research project is. My name’s Topher Field. This is the Topher project, and I help busy people like you to keep up with the world as it changes around you and to make sense of the nonsense. I am 100% viewer supported, and I don’t get any of your taxes, unlike those researchers. So, please help me to keep the Topher project going by buying me a coffee via the button at topherfield.net and check out my books and DVDs and merch at goodpeoplebreakbadlaws.com.

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