ACT tax reforms sound, but feds can help

Prosper member Ron Johnson featured in today’s Australian Financial Review:

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Phillip Coorey (“ACT land tax may please wonks but that’s about all“, AFR, June 6-7) claims that the ACT government commenced its tax reforms with “no mandate, no public discussion, just an impost”. Yet for two years prior to the 2012 ACT election, the government facilitated a high-profile review of the ACT taxation system. The review findings and the government’s response were published five months before the election and there was a comprehensive public debate about the merits of their proposed move to a greater reliance on unimproved land values as the basis for public revenue collection. Labor overtly staked its political fortunes on this policy and won the vote of the people.

Mr Coorey claims that the tax reform arrangements discriminate against land owners on low incomes, but he does not mention that the ACT government has a rates deferral and rebate scheme in place to assist pensioners. Mr Coorey correctly explains that, “Those who had recently bought homes and paid stamp duty, only then to be hit with a rate rise, were also double-taxed”. This is an implementation problem that needs to be fixed through fairer phasing arrangements.

However, the really crucial piece missing in this tax reform puzzle is much needed relief from federal taxes. At the very least, the federal government should introduce an income tax deduction equal to the land rates paid by ACT citizens and offer to extend this arrangement nationwide. Even better, they could abolish all 125 inefficient taxes currently in force and singularly rely upon the capture of land values for revenue.

Ronald E. Johnson

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