The treasurer is emphasising the number of people with a negatively geared property rather than who benefits most financially

Scott Morrison v the Grattan Institute: who should we believe?

A Grattan Institute report on negative gearing says the main beneficiaries of the housing investment strategy are not – as the treasurer, Scott Morrison, claims – low-paid workers such as nurses, teachers, hairdressers and sales assistants.



Instead, the report says surgeons, doctors, finance managers and lawyers are the overwhelming beneficiaries, with the top 10% of income earners before rental deductions getting almost 50% of the tax benefits.

Who should we believe, Morrison or the Grattan Institute?

When Morrison says the main beneficiaries of negative gearing are “mum and dad investors”, he is deliberately emphasising the sheer number of people who have a negatively geared property.

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As he told the Sydney radio host Ray Hadley on Tuesday morning: “There are 57,000 teachers who negatively gear, 39,500 nurses and midwives, 17,500 electricians, 14,500 truck, train and tram drivers. Let me tell you how many anaesthetists there are: less than 1,000.”

But by emphasising the sheer number of people in each income decile who negatively gear their properties he is not answering the question about who benefits most financially from the policy.

That’s what the Grattan Institute report is emphasising. John Daley and Danielle Wood from the Grattan Institute say high-income earners are the main beneficiaries of negative gearing because they are taking the “lion’s share” of the tax benefits.

They say analysis of tax office data shows a higher proportion of workers in high-wage occupations negatively gear and they also receive larger average tax benefits when they do so. Morrison and the Grattan Institute are not using the phrase “main beneficiaries” in the same way.

Think about it this way. Imagine there are 1,000 low-paid workers standing on one side of a room and 100 high-paid workers standing on the other side.

Of the low-paid workers, 60% are negatively gearing, so that’s 600 people. Of the high-paid workers, 90% are negatively gearing, so that’s 90 people.

Assume the low-paid workers who are negatively gearing are getting a tax benefit of $10 each, while the high-paid workers are getting $100 each.

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Following Morrison’s logic, the main beneficiaries of negative gearing are clearly low-paid workers, because there are more of them using the strategy – 600 people compared with 90.

But that logic prevents us from thinking about the share of the tax benefits going to each worker.

Following the Grattan Institute’s logic, the main beneficiaries of negative gearing are clearly high-paid workers, because a higher proportion of them are using the strategy (90% compared with 60%) and they are also receiving larger tax benefits ($100 each compared with $10 each).

But that logic prevents us from thinking about the number of people using the tax strategy.

Morrison wants us to think about the number of people negatively gearing; the Grattan Institute wants us to understand which income groups are benefiting disproportionately from the strategy.