Abandon bad taxes


Flinty Deloittes economist Chris Richardson and all-heart ACOSS chief Cassandra Goldie are on the same page today in the Australian Financial Review. Literally – page 47. Their tax policy prescriptions, now Malcolm Turnbull has ruled out increasing the GST, are identical.

Both pieces are paywalled to limit readership and discussion to AFR subscribers. We won’t let that stand in the way.

Richardson does the usual survey of tax options and comes to the right conclusion:

Finally, it may also throw some of the tax reform focus back where it should be. Although the Feds can indeed deliver a better and fairer tax system, the states have both the best and the worst taxes in Australia.

If they could be convinced to embark on a path much like the ACT has done – swapping stamp duties for land taxes – then that could deliver a larger growth and prosperity dividend than anything we could ever squeeze out of GST reform.

Goldie looks at the need to spend money on the health and education of all Australians and seizes on the best tax reform to fund this:

The real efficiency gains would come from options such as replacing inefficient taxes, including stamp duties, with more efficient taxes, such as a broad-based land tax.

The Turnbull-led Coalition says it wants efficiency, wants to cut the cost of government and wants to deliver prosperity.

Well here it is: use land tax and ditch the tax bases causing actual harm – they could start with Stamp Duty and Payroll Tax.

These are state taxes, and the states have repeatedly shown they prefer the sugar-hit of immediate popularity over growth and opportunity for their citizens. They are not going to reform themselves without heavy prompting.

The solution is a universal nil-exemption federal land tax calculated on a per square metre basis as the Henry Review recommended.

This tax would cost us around 90c in the dollar, compared to Stamp Duty that costs $1.70 for every dollar raised.

Making this fully rebatable against state land taxes paid would oblige them to end the exemptions and wheezes that undermine the integrity of both land tax and government. If they wont collect it, the Commonwealth will and can keep the revenues.

Our dysfunctional federal system can be used positively. The feds can blame the states for obliging such high-handedness while the states can blame the feds for forcing through reform unpopular with powerful landowners.

Both can indulge in finger-pointing to deflect attention AND we can have the tax reforms Australia urgently needs.

The real winners will be the men, women and children who make their lives here. Yes, we can tax ourselves to prosperity – with land tax.

1 Comment

  1. Theo09-02-2016

    The statement about how politicians “prefer the sugar-hit of immediate popularity over growth and opportunity for their citizens” is half right.
    Politicians are the reflection of the people who vote for them. The majority of voters like it the status quo today. They would not recognise true growth and opportunity even if they tripped over them TWICE!!
    The PM Turnbull sounds more of a tax revolutionary. Still his statements are mere words and if he or his government survives I doubt he will radically change the taxation system. His was born into a life of privilege and wealth. Very rarely and especially a politician would care about improving the life and ensuring the prosperity of those who work for minimum wage.

Leave a Reply