06_712967665_north_600x_white

West Australian Treasurer Mike Nahan has acknowledged Stamp Duty is “dumb” but has no interest in changing it, claiming There Is No Alternative.

ABC WA reports:

In a speech to an economics forum in Perth on Tuesday, Dr Nahan said the state had come to rely on inefficient taxes, but reform was not an option.

“Our largest tax base, besides payroll, is stamp duty on housing transactions which is actually a tax on people moving house – about as dumb as you can get,” Dr Nahan said.

“Even when the GST was put in it was agreed that stamp duty is amongst the worst [taxes], particularly transfer fees on housing.

“It’s a bad tax but it’s a very important tax to us and we have no alternative.”

Anyone with a passing knowledge of tax and economics will be gobsmacked by these remarks.

Treasurer Nahan publicly acknowledges the serious deadweight costs imposed by locking citizens in and out of housing with Stamp Duty but refuses to do anything about it. Never mind he swore an oath to govern in the best interests of West Australians.

There most certainly is an alternative, Dr Nahan. Treasury has presented you with endless briefings and cajolings to abolish this very bad tax and replace the revenues by removing all exemptions from State Land Tax, SLT hurts no one but you refuse to even consider this reform.

Despite REIWA President David Airey pleading for exactly this, and the Treasurer’s office saying Dr Nahan had heard the REIWA’s call, this defence of the indefensible is his answer.

The mining investment boom is fading and the contractors are leaving. WA is now in an era of falling land prices. Now is the ideal time to remove a tax on transactions and replace it with charge on land holding. No one knows how low land prices will go – we should expect at least a revert to mean, which will hurt a lot of people. SLT adjusted by regular land valuations would act as a powerful automatic stabiliser and reduce the pain of this change.

If Dr Nahan persists with Stamp Duty, he should be warned these revenues are about to fall off a cliff as transactions shrivel in a declining market, without the automatic stabiliser benefits of SLT.

This episode is a very unpleasant reminder tax systems are made by politicians who bring to the task their own preferences and prejudices, and are willing to stand by dumb, bad laws.