Albanese’s tax changes make the wealthiest tenants better off while making the poorer ones worse off. By Henry Ergas in The Australian.
Faulty lefty argument:
Saul Eslake’s recent article in The Guardian welcoming Labor’s proposed tax increases … is a textbook example of “progressive” economics.
Like every good progressive, Eslake approaches public policy as a search for victims and oppressors. In his telling, the victims are would-be owner-occupiers; the oppressors are landlords. Those roles assigned, the argument largely writes itself.
He begins with a conceptual confusion. Shelter, he says, is a basic human need. Quite so. But he immediately smuggles in a wholly different proposition: that a right to shelter entails a right to home ownership.
That proposition is absurd. In Switzerland, some 60 per cent of dwellings are rented; the proportions in Germany and Austria are only slightly lower. Yet no one could argue that the Swiss, the Germans and the Austrians are denied the right to shelter. By every measurable standard they are extremely well housed.
Eslake’s error is simple. A right to shelter is a claim about the consumption of housing services; a right to home ownership is a claim about the ownership of assets.
The two are no more identical than a right to nutrition is a right to own a farm. …
Follow the money:
What that means — and what Eslake astonishingly overlooks — is that Labor’s policies do not benefit all, or even a majority, of the “oppressed”. They may benefit tenants who move into home ownership; but to the extent the higher costs imposed on landlords are passed through into rents, they make the remaining tenants worse off. …
The new owner-occupiers are likely to be the tenants with the highest incomes: those already on the cusp of buying but not quite there. The policies therefore make the wealthiest tenants better off while making the poorer ones worse off. That is quite an achievement: a policy sold in the name of equity that redistributes from poorer renters to richer ones. …
Winners and losers:
The basic point is straightforward: it is very difficult, if not impossible, for a policy that works by raising the cost of supplying an essential good — in this case shelter — to make the community better off.
It is hard to believe that this one is an exception. It penalises most tenants to benefit a relatively small number of affluent renters, redistributing from the poorest tenants to the richest; it imposes substantial efficiency costs on the Australian economy; and if there are any gains to future buyers, they come entirely by inflicting large losses on existing asset owners, breaking election promises, increasing uncertainty and discouraging investment.
We began with a simple distinction: a right to nutrition is not a right to own a farm, and a right to shelter is not a right to own a house. Labor’s policy forgets it — and in forgetting, contrives to starve the very people it claims to feed.
That such a program should be presented as an obvious social good is remarkable. That it should be applauded as a triumph for the disadvantaged is positively perverse.
Labor has become the party of the wealthy, for the wealthy and by the wealthy. It was inevitable, as big government grew every bigger and their supporters grew wealthier due to government action. Albanese himself is clearly a wealthy man.