Matt Lewis

This is so incredibly good: Economist Joseph Schumpeter warned that capitalism weakens when prosperous societies become so comfortable they forget where prosperity came from – and begin resenting the entrepreneurial class that created it. A country might survive high taxes for periods of time. What becomes dangerous is something deeper: the moral suspicion of ambition itself. The creeping belief that commercial success is inherently exploitative, that profit is morally dubious, or that founders should quietly accept punishment for surviving years of uncertainty. Prime Minister Anthony Albanese and Treasurer Jim Chalmers should think carefully about the signals embedded in this budget. Tax policy communicates values. This budget signals that founders are not viewed as partners in national prosperity, but simply reservoirs of revenue whose success is viewed with suspicion... Civilisation advances because some people are willing to bet on tomorrow before tomorrow exists. Australia should be doing everything possible to encourage those people to build businesses here. Because once a society begins treating ambition as something suspect rather than admirable, it eventually discovers that no nation can remain prosperous after teaching its most ambitious people that they are unwelcome. afr.com/politics/federal/bud…

The chart below shows the effective capital gains tax rate facing a business owner who invests $250,000 upfront, holds for 10 years, and then exits at different valuations. The result is striking: under Labor’s proposed CGT changes, Australian founders and investors would face an effective tax rate of up to 46% — roughly double the burden faced in most comparable markets, including the US, UK, Canada, Germany, Japan and New Zealand. And this is not just a founder problem. The same logic applies across all small, medium and large businesses, and any asset, including listed equities, property, private equity, venture capital and crypto. If these changes proceed, Australia will become one of the least attractive places in the developed world to build, invest, take risk and realise gains. The one major asset still sitting outside this tax net is the owner-occupied home, which remains CGT-exempt. That creates a powerful distortion. If investment properties, businesses, shares, commercial property and other assets are hit with materially higher effective CGT rates, capital will rationally look for shelter in the family home. The likely result: less capital for startups and productive enterprise, lower productivity, more pressure on rents as investors retreat from housing, higher inflation and interest rates, weaker demand for risk assets, and even more money being recycled into owner-occupied property — the last great tax haven in Australia. In short: this is not just a profound increase in the tax burden, with zero consultation in the name of giving imprudent politicians more money to waste. It is a major repricing of risk-taking in Australia. It is not reform: it is highly regressive, as it seeks to punish entrepreneurial success, which is the key driver of long-term jobs, incomes, growth and prosperity. It does not boost productivity: it destroys it by actively discouraging innovation and business creation. It will not lower the cost of living: it will lift it by boosting rents and making us much more inefficient. It will not reduce interest rates: alongside rampant and reckless government spending and record migration, it will pressure the RBA to raise our mortgage repayments. What is perhaps most shocking is that only 12 months ago this government was elected on the basis promising to never make these changes...