When the Turnbull government argues that tax offsets allowed though negative gearing are best international practice, it’s not actually true.
According to the Grattan Institute, overseas best practice does not allow losses from negatively geared assets to offset salary income.
Head of the think tank John Daley says Australia's version of negative gearing, along with the 50 per cent capital gains tax discount, costs the public purse $11 billion a year.
In a new analysis just released, the institute makes proposals to half that cost - a phased winding back of the CGT discount and negative gearing over a 10-year period, raising $5.3 billion in additional revenue each year.
He said people are being overly compensated for inflation with the 50 per cent CGT discount and a reduction to 25 per cent in stages would raise $3.7 billion a year.
Limiting the losses from negative gearing to offset gains from other investments and not wages, would raise $2 billion a year in the short term, falling to $1.6 billion when the change is fully implemented.
He believes these proposed changes will improve housing affordability a little, with house prices easing by no more than two per cent.
Rents wouldn't change much, nor would the rate of new development.
As negative gearing stands, it substantially increases borrowing by investors - which is one of the reasons the Reserve Bank doesn't like it very much - and it results in less owner-occupied housing and more investor housing.
"It is unclear why we would want to encourage that," Mr Daley has said.
He believes Labor's proposal to limit negative gearing to new property while allowing people already holding negatively geared properties to continue - so-called grandfathering - will just add to distortions and complexities in the tax system.
But he is pleased that one side of politics is prepared to talk about changing negative gearing.
"I am pleasantly surprised that a political party in Australia has had the courage to have a go at negative gearing," he said.
Prime Minister Malcolm Turnbull has ruled out any changes to negative gearing as part of the government's tax reform package to be released with the May 3 budget.