Tax reform is hard for government: losers complain loud and long, while those who will benefit are suspicious and silent.
We should be angry as hell about the tax system. It scoops up the earnings of the poor but merely nips at what the wealthy make.
That’s why the Victorian Treasury submission to the Henry Tax Review is so disappointing.
Here is the best chance in a generation to lift the burden on labor and business – eliminating stamp duty on property and ending payroll tax – by using Victoria’s Land Tax laws better.
But the Victorian Treasury is paralysed:
“However, it would cost between $15 and $20 billion to abolish State stamp duties… Raising this revenue through existing State taxes is not a viable option. Raising the rate of payroll tax and land tax, or applying them to more taxpayers, could place too great a burden on asset rich, income poor property owners and small business owners.”
If we ended stamp duty, buying and selling property would be cheap and easy. The asset-rich could move to a more suitable home at virtually no cost.
If we ended payroll tax, profits and work would multiply. There would be good jobs for everyone. Only the old and sick would be income poor. Giving them a helping hand would be an honor.
But back to the Treasury submission, where we learn the button-bright economists at Vic Treasury know State taxes distort human behaviour and are unreliable:
“Public submissions to the Review have highlighted State reliance on stamp duties, arguing that they limit economic activity and distort investment choices.
“There would be benefits in reducing or abolishing these taxes. In addition to other concerns, they are unpredictable, responding more than other taxes to volatility in specific markets. This makes them less suitable as the basis for funding important public services, which are likely to be even more in demand in difficult economic times. State taxes are also generally slower to recover after an economic downturn.
Did you notice the words ‘In addition to other concerns’? They are quick to dismiss a wide range of genuine benefits because they help citizens, not government. Bad taxes distort human behavior and stifle economic progress.
Tax reform is hard and dreary work. It remains the single most useful way to uplift the lives of everyone.
The best tax – the one that cannot be avoided, is progressive and promotes prosperity – is Land Tax. Use it, Victoria!