Hood Robin

Posted on July 31, 2005 by

Is it just me, or does it strike anyone else as odd that NSW Premier-to-be Morris Iemma has decided that one of his first decisions as Labor leader will be to scrap a tax that applies only to those affluent enough to buy investment property?

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8 Responses to Hood Robin

  1. Sacha Blumen says:
    August 1, 2005 at 4:44 pm

    No, unfortunately. Property investment is very popular in Sydney and no doubt scrapping the tax will be popular with a lot of voters. A popular sentiment is that the tax is a major cause of the downturn in the Sydney property market.

  2. Andrew Leigh says:
    August 2, 2005 at 8:36 am

    With a lot of potential Labor voters? I’m sure the lads at Sussex St have done the numbers better than me, but surely you have to be among the richest 10% of the population to buy investment property, and there ain’t many of them voting Labor. So then I suppose you have to assume that a lot of potential ALP voters erroneously think they’ll soon buy investment property.

  3. Sinclair Davidson says:
    August 2, 2005 at 9:55 am

    Dare I say it? Trickle down effects. More likly waterfall effects.

  4. Guy says:
    August 2, 2005 at 2:28 pm

    Err… yes. A somewhat disappointing decision for mine from Iemma. Smells like a man who is running scared of Brogden.

  5. Andrew Leigh says:
    August 2, 2005 at 2:31 pm

    Sinc, how so? Surely you’re a Coasian.

  6. Sinclair Davidson says:
    August 2, 2005 at 4:26 pm

    Yes, I am. But not sure if and how that contradicts the notion that trickle down occurs.

  7. Andrew Leigh says:
    August 3, 2005 at 8:53 am

    Sorry, Sinc. We were thinking of different things. I thought you were arguing that there would be more rental property on the market if we reduced transaction costs (we wouldn’t expect this in a Coasian world). But in fact you were arguing that putting more money in the pockets of property owners should eventually lead to more rapid economic growth. I suppose my response to this is that if ever you were going to be sceptical about trickle-down, surely it’s gotta be in the case of the rentier class. These guys aren’t exactly cutting-edge entrepreneurs.

  8. Sinclair Davidson says:
    August 3, 2005 at 10:52 am

    Yep. It never occured to me that property taxes would have a negative impact on availability of rental property. That tax would just be capitalised – although uncertainty is tax rates would impact liquidity and prices. On the other hand, the property market is probably too illiquid and too non-standardised for prices to be really informationally efficient anyway.

    I was on about the latter. property developers/owners may well be disreputable nd hardly entrepreneurial, but as Adam Smith told us, “It is not from … benevolence … that we expect our dinner, but from regard to their own interest.”

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