The Housing Industry Association today released their estimate that conveyancing Stamp Duty costs Australian households $91 a month.
“By eroding deposits and making homebuyers borrow more, stamp duty is estimated to add $91 per month to household mortgage repayments for a median priced home,” HIA economist Shane Garrett said.
“Apart from hurting ordinary households, stamp duty restricts economic activity and obstructs the national dwelling stock from achieving its full potential in terms of the people it can house.”
Quite right. Stamp duty traps people in and out of housing. It hinders labour mobility and best job-matching. It means the opportunities to put land to its best and highest use are fewer and harder to achieve. Construction is discouraged.
Stamp duty also imposes very substantial deadweight costs, as I testified to the Senate economic references committee in 2014:
“Similarly, stamp duty is a very grave impost. People think the incidence falls upon the buyer. The buyer signs a cheque and they think the incidence falls upon them, whereas in fact it falls upon the vendor. So everybody is happy—everybody thinks somebody else is paying the tax. It is about time government straightened themselves out and said that we need to use not necessarily invisible taxes but the best tax bases we can find. The most honest tax is the tax with the least cost to the community. We are burning between five and six per cent of GDP each and every year because of our poor tax bases. It is a waste of money. If we want our country to flourish, here is a very obvious and painless way of advancing Australia.”
Unfortunately, Mr Garrett turns to wringing his hands over the interests of foreign investors in Australian residential property and whine how much tax they pay. It is surprising to see the HIA fretting about foreign investor interests rather than the people who are likely to occupy the homes HIA members build. I think discouraging foreign investment in housing is a good idea, explained here. We already have a giant pool of domestic investors displacing potential homebuyers to renting and hardly need more.
Mr Garrett wants to end stamp duty, so does Prosper and others. To complete his argument, he needs to identify how the substantial revenue losses would be made up.
The HIA’s Dr Harley Dale has previously called for the exchange of stamp duty for land tax – a stance that deserves applause – and re-statement by Mr Garrett.