Dekka

@cjoye So the total cgt tax rate on the real gain across your portfolio is much higher than your marginal tax rate. People need to consider the distribution of returns across stocks not just the total return!

There are two other dire consequences of this budget that nobody is talking about. The first is that the budget’s introduction of an effective capital gains tax of up to 45 per cent - 47 per cent – previously capped at 23.5 per cent for assets held more than 12 months – hits younger savers hardest, precisely because they have the highest portfolio exposures to high-growth assets such as listed global equities, Australian shares, crypto, venture capital and private equity. When anyone builds a portfolio for younger investors, they rationally load them up with the highest-growth and most volatile assets on the basis that a long investment horizon allows them to weather the inevitable volatility storms. As investors age, these portfolios shift into more stable and income-rich asset classes such as cash and bonds, which are net beneficiaries of the CGT increase, because their post-tax returns now look more attractive relative to growth assets. As many investors have noted online, why would you allocate to a bunch of high-risk growth companies when Albanese and Chalmers are going to take almost half the upside while wearing none of the downside? Rather than helping younger generations, the highest CGT rate in the developed world will hammer them. And it is a double whammy because the many early-stage companies that have historically employed 20- and 30-somethings will now consider moving overseas. Their investors will simply not want to trade away half of their upside to the public oligarchs. If you allocated $10,000 to bitcoin after the March 2020 pandemic shock – which many young punters did, and which would now be worth approximately $92,000 – the new CGT regime imposes vastly higher amounts of tax. A self-funded retiree on the tax-free threshold would go from paying nothing to almost $24,000. Somebody earning between $18,000 and $45,000 a year would see their tax bill jump from $7400 to $23,900 – a 222 per cent increase. Those in the $45,000 to $190,000-plus tax brackets would have their bill rise by 93 per cent. Since the new CGT regime is, by definition, much more costly on higher-growth investments, it will punish younger investors who have much greater risk appetites and lower average incomes. afr.com/markets/equity…

@cjoye Great stuff Chris. It is even worse than this as you don’t get to inflation index your capital losses. In any high risk portfolio, you’ll have a large number of investments that do worse than inflation, but may break even nominally.

@TheFakeHolland @TheKouk I've never really heard of him until now; is he one of these people that masquerades as an economist, but when you dig a little deeper, you realise he has no understanding of it?

@DerekFranc90653 @TheKouk He says stupid stuff most of the time but this take is probably the dumbest take I’ve seen him do.

Opposition leader Angus Taylor is promising, if elected, to index income tax scales to the inflation rate. This is not a good idea. For example, if inflation was 2.5%, the level at which a worker moves from a tax rate of 30% to 37% is lifted from $135,001 to $138,376. They are automatic income tax cuts in line with inflation. If inflation is 5%, as it is not, that tax scale would rise from $135,001 to $141,751. A huge rise and a huge tax cut at a time when inflation is ripping along. The problem with such a scheme is clearly that it is pro-cyclical. In an era of high inflation and an overheating economy, the rise in the tax scales will be big which gives large income tax cuts to the workforce. This would see the policy working against the RBA's anti-inflationary stance in this example. Interest rates would be even higher as a result. The proposal would make it much harder for the RBA to meets its inflation target and / or will require much greater volatility in interest rates as the RBA fights to offset the pro-cyclical nature of the the indexation of tax scales. And it costs a fortune - a chunky $23 billion in 4 years. youtube.com/watch?v=PaSZG2…

@TheKouk Did the Labor party come up with this argument and tell you to write it up, or did you come up with this ridiculous nonsense all by yourself. If the former, you need have a real go at them for selling you a complete dog with flees that makes you look really stupid!

@TheKouk x.com/DerekFranc9065…

@TheKouk So Kouk, do you think raising the average income tax rate on young people by 12% over the budget period from 25% to 28.5% of income, by not indexing for inflation, is a good thing? And if so, why?

@TheFakeHolland @TheKouk He's so stupid its worrying that anyone would take him seriously!

@DerekFranc90653 @TheKouk The frightening thing is that this Kouk was economic advisor to two previous Australian governments! No wonder the ordinary person is smashed!

@TheKouk You are confusing nominal and real wages, which you should have learn't the distinction between in your first economic lecture. So so stupid.

@TheKouk Inflation indexing DOES NOT give an income tax cut with high inflation. You're a complete idiot. If the real wage is the same, then inflation indexing leaves the real after tax wage exactly the same no matter what the inflation rate is. Where do you come up with this crap?

@TheKouk You don't seem to understand the simple difference between nominal and real income (inflation adjusted). Did you even study any economics?

@TheKouk The correct method is actually to index by growth in the real wage, which is even higher than inflation! Under inflation indexing, the government will gradullay take a higher share as real income rises. Under no indexing they take a higher share really quickly.

Its event worse than your analysis says, as renters use housing far more efficinetly than owner occuppiers. So if they all bought, the'd soak up more supply as you typically don't be in partnership with the flat mates you rent with! x.com/DerekFranc9065…