Todays Age article on Land Tax Cuts Wont Bring Savings alerts all those interested in defending the communities right to a share of the free lunch land prices reflect. The next few weeks will see the property lobby step up their claims to pay less and less of the one tax their army of accountants can’t dodge.
Some points we agree with. The article states that the State Land Tax cuts over the last 3 years from 5% to 2.5% for the top marginal rate have been offset by rising land prices. Suprise, suprise! Lower holding charges on land encourage more speculation, especially at the top of the market, where capital gains have been higher in both percentage and nominal amounts in many suburbs.
What we do agree with is the warning on bracket creep. The Brumby government should index Land Tax rates to CPI or ultimately to land prices as calculated by the Victorian Valuer General.
Bracket creep could be avoided altogether by flattening Land Taxes at a higher rate, offsetting harmful taxes on productive activity like Payroll & GST.
On the example given on a $10 million property incurring an additional $4,200 in Land Tax, Prosper Australia spokesman Karl Fitzgerald said:
“Property investors budget for increases in Land Tax. They cannot complain about sharing a miniscule 2.5% of the whopping $4,000,000 capital gain, let alone an additional $4,200 in return for this gain. This still leaves the owner of a $10 million property with over $3.3 million in money ‘earnt in their sleep’. This capital appreciation could be leveraged to buy additional property, further widening the gap between the haves and have nots.”
“Land tax is a simple mechanism to offset the benefits property owners receive from the developments society as a whole contributes to their land prices ie public works”
“Young people hoping to buy a house can only dream of earning $3.3 million in their sleep.”
“Brumby should think of the danger an efficient revenue raising mechanism like Land Tax faces if a Baillieu family member gets in government.”
“Reform Land Tax now by raising and flattening it on all land in place of GST, Payroll and Debits taxes.”
