Malcolm Turnbull today offered a gift of $1000 to every man, woman and child in Australia. The money will come every year forever – if the states and territories end Stamp Duty and fund this by removing the exemptions and wheezes from State Land Tax.
No, we don’t get a cheque. The money comes from ending the waste – the deadweight cost – of Stamp Duty that traps people in and out of housing.
The expense of change, of buying and selling property, would only be agents fees and a removal truck.
At a stroke, this reform would release a wave of enthusiasm and energy as we right-size our housing. First home buyers will avoid a disguised, dismaying tax, upsizers can add a bedroom by moving around the corner and down-sizers lower their expenses in the same exchange.
A worker offered a better job elsewhere can seize it, improving Australia’s skill-match and lifting productivity everywhere. Anyone enduring a long commute to work – a recipe for exhaustion, pollution, traffic congestion and divorce – can easily change their circumstances.
The PM’s initiative is still just a political exploration – he is cited only indirectly in the Australian Financial Review today. Turnbull cannot be blamed for this mix of political courage and caution on the eve of a federal election. His earlier tax reform ideas were met with howls of derisive laughter because they were so obviously designed to advantage the wealthy. This is different.
The AFR has wheeled out macroeconomist Chris Richardson of Deloitte Access Economics to make the case. Richardson is deemed sound by conservative thinkers – land tax is no longer the domain of resentful militant leftists.
“If there is any low-hanging fruit in tax reform in Australia, it lies here rather than the GST,” Mr Richardson said.
“I’m not saying you shouldn’t do the GST but bang for buck this is a stand-out option.
“You’re massively broadening a base and lowering a rate by shifting from stamp duties to land taxes.”
The $24 billion in savings seen by the AFR is the most modest estimate out there. The benefits to you and me could be much, much more.
Re:think says SLT has a deadweight cost of 10c in the dollar.
The Henry Review puts the deadweight cost at nil.
Recent Treasury modelling estimates a net benefit as foreign landowners must pay while the proceeds are spent entirely on Australian households.
Prosper Australia applauds sound tax reform ideas wherever they come from. If the source is the Prime Minister we are prepared to clap very loudly indeed.
Moving property taxes from a transaction charge to a holding charge will transform our behavior. There becomes little point to holding land we cannot put to use.
This is our opportunity to re-embrace the Settler compact that all political parties once held as sacred: that every Australian citizen, no matter how humble, should enjoy the freedom, independence and privacy of land ownership.