Labor has given one of its strongest signals yet the capital gains tax discount will be reworked in the May budget, with a parliamentary inquiry finding the Howard-era settings are helping fuel intergenerational inequality in Australia’s housing market.

A Greens-led parliamentary inquiry said the 50% discount “skewed the ownership of housing away from owner-occupiers and towards investors”.

“The benefits of the capital gains tax discount are also unequally distributed, with implications for income and wealth inequality and intergenerational inequality,” the report released on Tuesday found.

The treasurer, Jim Chalmers, has signalled a willingness to make changes to the discount, introduced in 1999 for assets held for more than a year.

Along with negative gearing rules, the discount has been blamed for promoting housing as an investment mechanism for wealthier Australians over the rights of would-be first time buyers.

Labor members on the committee linked possible changes to government work already under way ahead of the 12 May budget and last year’s economic reform roundtable, which promised to address intergenerational inequality in the tax system.

Treasury is modelling changes that could see the discount reduced to 33% for housing investors, while retaining the current 50% rate for shares and other investments.

The Greens Treasury spokesperson, Nick McKim, used the report to argue Labor’s majority and the Greens balance of power in the Senate represented an opportunity for the government to pass ambitious tax reform in the current parliament. In the report, he noted when the discount was established, 57% of 30 to 34-year-olds owned property. That figure has since dropped to 50%.

“The [discount] means that if you go to work as a teacher, a bartender or software developer you pay double the amount of tax than someone who received the same amount of money taking advantage of soaring property prices by buying and selling investment properties,” McKim said.

“It means that someone who speculates on housing pays a lower rate of tax than the carpenters, plumbers and electricians who actually build the houses.”

Chalmers said he would be briefed on the report’s findings in coming days, stressing budget decisions would be made by cabinet.

“It will no doubt identify some issues which are familiar to us,” he said.

“But I’ll read it, of course, I will. I’ve said that the government’s policies haven’t changed in this area. Any further steps will be a matter for the cabinet.”

Coalition senators strongly rejected calls for change however.

“If Labor pursues changes to the CGT discount, it will be another simplistic and one-dimensional response that sidesteps the central problem in housing, that not enough homes are being built,” Liberals Andrew Bragg and Dave Sharma said in a statement.

“The real answer to housing affordability is more supply, not another Labor housing gimmick.”

Independent senator David Pocock used the report to suggest Labor had “overlearned” the lessons of its 2016 and 2019 election defeats, when changes to CGT and negative gearing were rejected by voters.

Pocock recommended removing the discount for properties bought after 1 July this year, with a new 25% discount introduced for new homes. He called for negative gearing arrangements to be limited to a single investment property.

Research released last week by the Australian Council of Social Services found the five highest earning electorates nationally capture 22% of all CGT discount expenditure, against just 1.6% for the bottom 10 electorates.

A tax white paper released by the Sydney independent Allegra Spender this month argued for reducing the CGT discount to 30% as part of wider reform package that would allow major cuts to income taxes.