Prime Minister Anthony Albanese and Treasurer Jim Chalmers have confirmed in the past week that the May budget will contain major tax changes to help intergenerational inequality.

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Hopefully, it will be more than the half-hearted tinkering we have seen so far on major policy matters: the corruption commission, superannuation, and gambling.

However, the budget process is the wrong vehicle for an overhaul of the tax system. It is inherently secret, so there will be no input from academics, think tanks, and other outside experts, and no scrutiny or testing of proposals until it is too late and the government is locked in.

First, an apology for being very detailed in what follows, but bear with me. Too often sweeping, simplistic, notionally appealing policies in fact contain deep flaws that shut out many in society.

A classic example of this was the 1999 budget which created much of the tax mess we are in now.

Then Treasurer Peter Costello pulled out of the hat the 50 per cent capital gains tax concession. It wasn't a tax policy. It was a vote-buying thought bubble - more bubble than thought.

And it is deeply flawed at both ends: too much concession in the short term and a vicious, unfair penalty in the long term.

The 1999 changes when combined with negative gearing created a housing monster that has white-anted the Australian dream of home ownership.

For the past few decades more and more investors have been buying more and more houses with high interest repayments and high outgoings which they deduct against existing wage, salary, and professional earnings, reducing their tax liability.

They wait a few years in which the dwelling's value increases, because population increases fuel housing demand. The increase is usually much more than the outgoings, especially as the outgoings have been tax deductible. They then sell the dwelling making a big capital gain - only half of which is taxed.

In effect, the high-income earners convert income taxed at 47 per cent to income taxed at 23.5 per cent.

The social downside is that these investors are shutting out people who want to buy........

© Canberra Times