First to some explanations and history. Negative gearing is when the rent or dividend income from property or shares is less than the outgoings, in particular interest paid on loans to buy the property or shares. That difference, under present tax rulings, can be deducted against income earned as salary or from business.

In many countries that is not allowed.

When the property or shares are sold and a capital gain is made, only half of the gain is added to taxable income, under rules the Howard Government introduced in 2000.

Over the next 24 years the combination was been deadly. More than two million Australians now own investment properties and 1.3 million of those are negatively geared – with average deductions of $8700. It is costing about $10 billion a year.

It is no longer the province of the rich. Sixty per cent of negative gearers have incomes of less than $80,000.

The capital-gains tax concession costs the Budget $10 billion. Together the concessions cost more than double what all governments spend on social housing ($8.5 billion).

In short, people are converting income-tax liability with a marginal rate of up to 48 per cent into capital-gains tax with a marginal rate liability of up to only 24 per cent.

The other dead possum in the roof is the cash-rebate on share dividends for people with minimal taxable income – also introduced in 2000. It costs the Budget about $6 billion a year.

The 2000 measures were lollies to buy the elderly vote, not ration, thought-outpolicies in the long-term national interest. The consequence has been less money for social housing and taxpayers subsidising investors to shut out home-buyers – many forever.

Yes, Labor leader Bill Shorten’s promise to fix these things have been cited as a cause for Labor’s loss in 2019. But times have changed. Voters are better informed about what has happened.

Journalists too often underestimate the length of time it takes for the electorate to understand issues, particularly something a bit complicated like the fallout from the fusion of gearing and capital gains.

Even this close to the election, it is not too late for Prime Minister Anthony Albanese to act. And this is why he should do so.

First, after the past few weeks of silly media coverage, Labor has nothing to lose.

Those for whom negative gearing is a vote-changing matter have now already been frightened and are unlikely to vote Labor anyway.

Second, Albanese is fighting a rearguard action against the Greens who have become the go-to party for renters.

Third, these dud vote-buying “policies” are bad for the nation. They misdirect resources away from home-ownership, health, and education. Away from the hard-pressed young to the well-off old. And the number of hard-pressed young voters is growing while the well-off old are dying off.

Fourth, Labor needs to be seen doing stuff – well-thought-out stuff, not “stupid stuff”, as President Barack Obama called it.

But how to do it? Some have suggested “grandfathering” – so existing gearers can keep doing it and existing properties and shares keep the capital-gains discount.

Grandfathering originated after the Civil War in the US. Southern states – obliged to make voting universal – introduced voting restrictions like literacy tests to keep blacks from voting. But they included clauses to exempt the grandfathers (poor, illiterate whites who had the vote before the war).

The trouble with most grandfathering is that it takes a long time for the revenue to come in. But there was one taxation example of grandfathering in Australia that had a rapid effect. Before 2012 you could deduct all health expenses – mainly gap fees imposed by GPs, specialists and hospitals.

The deductions were not stopped in one go. Rather taxpayer deductions were limited to the amount claimed last year. The deductions dried up very quickly.

Another way would be to go back to the intent of the Income Tax Assessment Act. It allows deductions for “any loss or outgoing . . . in gaining or producing your assessable income”, but not if it is . . . “a loss or outgoing of capital, or of a capital nature”.

A brave tax assessor could say that borrowing expenses are only deductible if a net rent income is made within a reasonable time (say three years). If no net rent income is made in that time the whole investment scheme could be characterised as one to build up capital and so not deductible.

Better still, the government should change the law to limit negative gearing to the first (say) three years of the investment, after which losses should only be deductible against investment income or future investment income and not against salary or business income.

At present, the Government is presenting as timid and scared about what political advantage the Opposition might make out of any policy initiative. It is no way to govern.

For too long Australian politics has been a short-term game of throwing a few lollies to gain a few sectional votes or dreaming up scare campaigns. That is how we got into this tax mess in the first place.

It is made worse by media behaviour exemplified by the nonsense in the past few weeks on negative gearing – and speculating on the basis of a politician “refusing to rule out” something.

How about we start with a presumption that nothing is ruled in or out and that governments are looking at all policies all the time. That is what governments should be doing away. It would be negligent of them to do otherwise.

Crispin Hull is a former editor of The Canberra Times and regular columnist.
www.crispinhull.com.au