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  #1  
Old 3rd March 2017, 09:38 PM
wadaye wadaye is offline
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Default Why the tax system favors gentrification

Because it encourages house ownership to be seen as a business where the value of any house can be maximised by gentrifying the house, and the increase in value is tax free.

Buy a second house and the same principles apply due to the Capital Gains Tax exemptions and concessions, and negative gearing.
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Old 4th March 2017, 07:55 PM
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Default Re: Why the tax system favors gentrification

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wadaye said View Post
Because it encourages house ownership to be seen as a business where the value of any house can be maximised by gentrifying the house, and the increase in value is tax free.

Buy a second house and the same principles apply due to the Capital Gains Tax exemptions and concessions, and negative gearing.
But it really only works if you have economies of scale, especially during a recession. I lost heaps one one investment property, and only just broke even with another. You have to be really lucky, because if you don't get good tenants, they wreak the place. Because the risk of getting good tenants increases at the low income end, you have to cover it with really expensive landlord insurance. Either way, it is hard to break even, never mind make a profit.

If you are a big developer, then sure, the money will roll in. But most small investors are attracted to property because they know successive governments will fuck with their super, and the market fuck it up even more.

Like most things in public policy, the details matter. Negative gearing is necessary for small investors, because they are the ones that take wreaked houses, renovate them, and offer them for lease at reasonable and modest prices. Negative gearing for the big end of town is unnecessary and inequitable. Because buying is bulk is always cheaper, so they get better deals on insurance, better finance terms for their investments, discounts from electricians, plumbers etc etc. It is an entirely different business model from mom and pop renting out one or two inexpensive properties for their retirement income.

No, what is creating poverty is globalisation. And robotics. Full time, and permanent employment is getting to be a thing of the past. But mortgages are still mostly for 25 or 30 years. That is what is causing the inequity, the entrenched pain. An increasing number of people don't know if they will have the same job, or even any job in the next thirty months, never mind the next thirty years. Even if a financial institution takes a risk with them, they end up paying higher interests rates, which compounds the likelihood they will default, because their next job is less likely to be full time and permanent.

The tax system is involved of course, because trans-global corporations pay little if any tax. Which increases the tax burden on smaller corporations and ordinary workers.

Tax reform [which would have to be global in scope] will help with a more equitable distribution of wealth and income, but it won't solve the basic problems that globalisation and robotics have had in destroying jobs. Because although technology creates jobs, it is never going to create more than it destroys. And the new jobs it does create tend to be for the more talented and privileged and educated in society. I am not saying it is impossible for an ex-garbage-man to become a space-shuttle engineer, but it is hard. Most people won't make the transition to increasingly more technical jobs, even given generous education and training. Because in most countries, the safety net is just not there, or inadequate.

The philosophy of capitalism is to eliminate the "weak" via competition, instead of including them, and lifting them up.

So we have poor with no help to buy their own homes, under-funded state schools, two-tier medical care, two-tier fucking everything.

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Old 4th March 2017, 08:52 PM
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Default Re: Why the tax system favors gentrification

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wadaye said View Post
Because it encourages house ownership to be seen as a business where the value of any house can be maximised by gentrifying the house, and the increase in value is tax free.

Buy a second house and the same principles apply due to the Capital Gains Tax exemptions and concessions, and negative gearing.
The increase in value isn't actually tax free, it incurs Capital Gains Tax (CGT), unless it is your own home. That being said CGT is discounted to ~15%* after 1 year if you don't use the indexation method.

However, when combined with the ability to deduct costs from improving your property against other sources of income it is a rather broken system as it becomes a significant concession from the government. Its estimated to cost the government ~$11b per year in foregone revenue.

(foot note: costs incurred in improving your own home are not deductible)

*CGT is calculated at your marginal tax rate, but discounted by 50%, the average tax payer pays about 30% tax at the level were people would be investing in houses.
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Old 4th March 2017, 09:38 PM
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Default Re: Why the tax system favors gentrification

Big scale investors can also get depreciation. The first seven years is where the big bucks are. Renovating an old house you don't get depreciation for repairs, only home improvements..
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Old 4th March 2017, 10:20 PM
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Default Re: Why the tax system favors gentrification

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The philosophy of capitalism is to eliminate the "weak" via competition, instead of including them, and lifting them up.
I have been thinking about this. The waste of human capital by capitalism is extraordinary. It is not only those who are excluded (exclusion is also a matter of degree) but the exclusionary process which is itself alienating.

Why is broadscale agriculture considered more efficient while gardeners are ethnically cleansed or left unemployed? Why is dental care throughout the world prohibitively expensive when so many would almost die for the opportunity to undertake such training?
Why do so many young men and women feel so alienated from the present paradigm that they are prepared to go to ISIS for the sense of inclusionary brotherhood, even though it means being prepared to murder for their cause?
Our system is desperately broken and we are not heading in the right direction to solve this problem of alienation and an alienating socio-economy and political economy.
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Old 4th March 2017, 10:30 PM
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Default Re: Why the tax system favors gentrification

Thinking further on the subject the capitalist system is nothing but a directed economy (no less than the Soviet ine), directed by those with power towards the goals they have collectively set. The end goal of capitalism presently discernable apears to be an ownership by family dynasties of increasing portions of the world and power over it.
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Old 5th March 2017, 11:30 AM
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Default Re: Why the tax system favors gentrification

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I have been thinking about this. The waste of human capital by capitalism is extraordinary. It is not only those who are excluded (exclusion is also a matter of degree) but the exclusionary process which is itself alienating.

Why is broadscale agriculture considered more efficient while gardeners are ethnically cleansed or left unemployed? Why is dental care throughout the world prohibitively expensive when so many would almost die for the opportunity to undertake such training?
Why do so many young men and women feel so alienated from the present paradigm that they are prepared to go to ISIS for the sense of inclusionary brotherhood, even though it means being prepared to murder for their cause?
Our system is desperately broken and we are not heading in the right direction to solve this problem of alienation and an alienating socio-economy and political economy.
Indeed. The media wants people to look at ISIS as a monster, which of course it is-but that helps us how? Rather than a help, it is a hindrance, because it stops people thinking about the causes of the ISIS phenomenon in the first place, and in particular, the idea that aspects of "civilised" societies contributed to the genesis and growth of ISIS and other violent and radical movements.

Perhaps with the perspective of history we can see things a little more clearly. Like the evilness of the Nazis in World War two. That the Nazis were evil is not beyond dispute in rational discourse, but that tells us nothing about the etiology of Nazism. Perhaps the [now recognised as harsh] Treaty of Versailles is a clue? One can understand why the allies after fighting a long bloody war would try to limit any future military ambitions Germany might have, and feel the need to punish the transgressors severely. And this is assuming that the allies against Germany were the "good guys"-a thesis that cannot be maintained without important reservations.

There was plenty of blame to go around. The clash of colonial empires, the privilege of class, religion, etc, etc.

But back to the topic, capitalism is just assumed to be a good. Either state capital or individual capital. There is no doubt that some aspects of capitalism are positive, but debate has been muted about the less positive aspects of capitalism. The downside. Now that the phenomenon is truly global, how do we change it? To make it less toxic? Or alternatively, how could we discard capitalism for a better system? What would that system be? How can it be implemented now, when capitalism is universal?

A lot of people are feeling disenfranchised, and I believe the Trump phenomenon and ISIS are examples of diverse behaviours caused by the lack of consultation in processes such as globalisation and automation. Worse, I don't really think the elites have much control either, and although they may benefit more from the system than the great mass of people, they don't actually control it. They can influence it, but not control. "Control" implies they could start the system down and try something else, but I don't see anyone who has the capability to do that. Everybody is a captive of the system, be they rich or poor. The consequences for the poor are of course dire. But I don't see any way out of it, even if the compassion of the elites was limitless, and their motivation to change to a more equitable system determined. It is clear, for the present at least, the elites don't seem to be exercising much compassion, or indeed much will to change the system for the better beyond a few band-aid measures here and there.

In fact, I am not at all clear as to how much insight there is into the problems, in any sector of society. Isolated pockets and groups perhaps. But I wonder how long the pressure will build before it explodes into violent and universal chaos? To me things like ISIS are the canaries in the mines. Early warning signs of far worse things to come. Perhaps Trump is the beginning of the end. A tosser that pretended to listen, then after achieving power, helped the bad to go worse.
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Old 5th March 2017, 01:00 PM
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http://www.politico.com/magazine/sto...tocrats-108014

On my phone but some people get it.
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Old 6th March 2017, 08:20 AM
wadaye wadaye is offline
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Default Re: Why the tax system favors gentrification

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http://www.politico.com/magazine/sto...tocrats-108014

On my phone but some people get it.
Thats an intelligent argument. If he considered the waste of human capital he might be tempted to join the occupy movement.
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Old 6th March 2017, 12:17 PM
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Default Re: Why the tax system favors gentrification

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Thats an intelligent argument. If he considered the waste of human capital he might be tempted to join the occupy movement.
I sort of got the impression he was warning people that the shit would hit the fan, rather than having much compassion for the great unwashed.
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