The Liberal Party dragged little Addison Mignacca from suburban obscurity to be an innocent prop for a tawdry election stunt – certainly not a reasoned examination of preferred economic and social policy. Mr Turnbull used the tax deduction one-year-old Addison Mignacca, of Penshurst, was getting to help her buy a home to justify making no change to negative gearing. Credit:Michele Mossop Spruiker Turnbull effectively told us we're failing as parents if we haven't joined the landlord class on behalf of our children. If you're not making the most of reducing your tax through negative gearing, you're tearing at the fabric of Australian society, undermining the economy and threatening everyone's retirement by reducing housing prices. Oh please. Question already asked The reality is that negative gearing and (most importantly) the way it interacts with the 50 per cent capital gains tax discount is not the great evil some affordable housing campaigners claim but our present system is faulty, capable of causing damaging distortions, and could be improved.

Like most things relating to tax, it was dealt with very nicely in the 2009 Henry Review – back when Labor was in power and not interested in the political pain of following the recommendations. Henry proposed reducing the bias in favour of capital gains from rental properties by treating it more neutrally compared with rental yield. The key fault of Malcolm Turnbull's beloved system is the 50 per cent discounting of income from capital gains while the costs of obtaining rental income are deductible at 100 per cent of the individual's marginal tax rate. Illustration: John Spooner. The distortion that flows from that through the inevitable human drive to minimise taxation is well known to everyone with an interest in the area, including the government. Impact on housing

As the Henry Review explained, neutralising the distortion could have an adverse short-to-medium-term impact on the housing market. "Investment returns in the Australian residential housing market are likely driven by capital gains rather than by rental yield. As such, reducing net rental losses and capital gains tax concessions may in the short term reduce residential property investment," the review said. "In a market facing supply constraints, these reforms could place further pressure on the availability of affordable rental accommodation within the private rental market. These reforms therefore should only be adopted following reforms to the supply of housing and reforms to housing assistance." The weekend's electioneering was nothing more than schoolboy debating – big assertions, lots of manner, obvious method and not much matter. Labor's proposal attempts to reduce distortion as well as that short-to-medium-term impact by continuing to allow negative gearing for new properties and by retaining a 25 per cent capital gains tax discount.

It's not the only way to skin the housing cat – the government was considering an upper limit on deductions until cheap politics intervened – but it's worthy of serious analysis if a government's primary interest was the long-term welfare of the nation. Schoolboy debating Instead of analysis, the weekend's electioneering was nothing more than schoolboy debating – big assertions, lots of manner, obvious method and not much matter. Treasurer Scott Morrison underlined that in his reaction to being challenged about what modelling the government might have to support its case: "We have the common sense to know we have to leave the system as it is. So it's for the Labor Party, who are proposing a housing tax, to explain their policy and why they think that'll be good for people who are just simply trying to get ahead." So there. It is just 'cause I said so. Loudly.

Funnily enough, by the Prime Minister's logic, rents are being jacked up, home values reduced and the fabric of society torn even as he extols the nation-building virtues of one-year-old Adison's future property portfolio. Data shows another 'villain' If you really wanted to run a scare campaign, you could highlight the latest raw ABS housing finance figures. In the heroic Mignacca class of individuals buying properties for rent or resale, lending finance has crashed 36 per cent from the June peak month to $8.3 billion in February. On the less-startling trend series, they're down 20 per cent to $9.2 billion. So if Turnbull were consistent, he'd be cleaning out APRA for clamping down on investor loans and he'd offer extra government largesse for investors to make up for the market turning.

Such would be the apparent responsibility of a Prime Minister pledged to securing Adison Mignacca's future by keeping housing prices rising through ever-greater investor demand. Fellow spruikers would be pleased.