(Image: Tom Red/Private Media)

If the polls are correct, Treasurer Josh Frydenberg will deliver his last budget this evening.

It will certainly be an election budget, packed with goodies despite a big deficit. And it will exploit a $20 billion improvement in revenue and the unallocated $16 billion revealed at the mid-year economic update in December.

But what is likely to be missing is much talk of reducing deficit and debt and growing revenues from higher taxation or fixing loopholes.

Virtually all pre-budget chatter has missed any mention of fixing two of the country’s biggest tax rorts: the 2007 decision by John Howard and Peter Costello to hand retirees tax-free income from super and cash refunds on fully imputed dividends, and the capital gains tax discount for investing in property — especially houses and apartments.

According to modelling by the Australia Institute, cash refunds for spare dividend imputation credits cost the federal budget more than $5 billion a year, and more than half go to people with more than $180,000 in assets.

The capital gains tax concession on investor housing could cost upwards of $7 billion. In a moment of unintentional levity a paper from federal Treasury in 2006 (i.e. when Costello was Treasurer) made this claim:

“In 1999 a capital gains discount was introduced to promote more efficient asset management and improve capital mobility, by reducing the tax bias towards asset retention, and to make Australia’s capital gains tax internationally competitive.

“The indexation and averaging provisions were removed for assets acquired after 30 September 1999. Under the discount, individuals and the beneficiaries of trusts pay tax at normal rates on only half of any capital gain realised on an asset held for at least 12 months. Superannuation funds receive a one-third discount.”

An inquiry in the late 1990s claimed the change would “encourage a greater level of investment, particularly in innovative, high-growth companies”.

Nothing of the sort happened. We have had a succession of property booms financed by greedy banks (and governments, especially at a state level after stamp duty tax income).

Instead, by encouraging investors to buy and hold property, the 50% capital gains discount increased investor demand for housing — especially from the self-managed super fund sector whose beneficiaries are one of the main recipients of the tax refunds from imputed dividends and pushes first-homebuyers out of the market.

Before capital gains tax was halved and Australians dived into becoming landlords, more than 70% of Australian households owned the home in which they lived and one-quarter rented. At the latest count fewer than two-thirds own the place in which they live and more than a third rent.

Are you a beneficiary of the Howard and Costello rorts? Or do you want them dead, buried and cremated? Let us know your thoughts by writing to letters@crikey.com.au. Please include your full name to be considered for publication. We reserve the right to edit for length and clarity.