Super, land tax reform win universal support

By Leith van Onselen

Two of the biggest tax policy no-brainers – reforming superannuation concessions and replacing stamp duties with broad-based land values taxes – received near universal support from business and community leaders at last week’s AFR tax reform summit. From The AFR:

Nearly 90 per cent of delegates surveyed… said those two changes were of medium to high priority. A large majority also believed the community would rate changes to super tax breaks as a high priority…

Delegates were asked to rate a series of options as low, medium or high priority. They were also asked to indicate the level of priority given to each option by leaders and the broader community…

Interestingly, superannuation and land taxes were ranked as a higher priority than raising the GST (80% felt it was was of medium to high priority) or cutting company taxes (51%).

As has been spelled-out at least 100 times on this site, reforming superannuation concessions represents the low hanging fruit in tax reform, offering the double benefit of significantly raising Budget revenue whilst also improving the progressiveness of the tax system.

The politics are also favourable given superannuation reform would immediately wash-off the Abbottalyptic stain of “unfairness” that tainted the Coalition and offer a large dividend in Budget repair to the conservatives. The Greens are in favour and will back it in Senate. It would also outflank Labor, who are in favour of reform but have offered only a partial (‘wet lettuce’) fix.

Replacing stamp duties with land taxes is also a policy no-brainer, offering massive efficiency benefits. As shown in the Treasury’s recent tax discussion paper, the efficiency cost of stamp duties are extremely high, whereas land taxes actually offer positive welfare benefits:

ScreenHunter_6774 Mar. 30 10.24

Conveyancing stamp duties… have a high excess burden because they discourage the exchange of residential and business properties…

Modelling also suggests that broad-based land taxes, such as municipal rates, have a low economic cost (Chart 2.9). This is because land is immobile (unlike other capital) and cannot be moved or varied to avoid tax. The model applies this assumption to both domestic and foreign ownership of land. Land taxes paid by foreign and domestic landowners are only redistributed to the domestic households, providing a benefit to Australian households and generating a negative marginal excess burden for a broad-based land tax shown in the chart.

That said, in addition to these obvious policy no-brainers, Malcolm Turnbull and Scott Morrison would do well to consider reform of the tax system as a whole, with all tax revenues and tax expenditures examined in unison.

Tony Abbott destroyed the reform process with his ‘captain’s calls’ ruling-out of changes to superannuation, negative gearing, and the capital gains tax discount, which ensured that any package that the Coalition came up with would be half-baked and very likely inequitable as well.

But now that there’s a new sheriff and deputy in town, there’s the unique opportunity to re-boot the whole tax reform process.

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Comments

    • I agree that Land Tax is a good idea.
      I just don’t see any politician with the cojones to do it.

      If, as a nation, we couldn’t get our heads around the idea of taxing carbon polluters, what hope is there for this? Buckley’s and none, I’d suggest.

    • They start working at 1 am…. Naturaltrust and all his (I think its a he) other personas must be asleep after a big weekend.

    • Having recently paid a large chunk of change in stamp duties, I could only vote for a land tax if people like me are given a land tax holiday equivalent to the stamp duty we paid, from the date of payment.

      • Haven’t all existing property owners done likewise – its a sunk cost? It’s baked into the existing prices pie. “Allowing” for just one ingredient makes no sense. (ie: whatever you buy next, and next, and next also currently has it baked in?) That you have paid ‘the top’ is immaterial. You will recoup that from either (1) your resale price if prices rise or (2) your repurchase price if prices stagnate or fall.

      • No you don’t! Council Rates are for the provision of services – rubbish collection; street sweeping; Councillors’ salaries! etc. They are a Levy in the truest of senses, they are not a Land Tax. The fact that Land Valuer is used to determine the allocation paid by owners is simply trying to ‘make it fair’ on all those services’ users.

      • It depends if you take a wider view Janet. The differential on the costs of a Toorak garbage bin and a Sunshine one is not represented in the assessment in Melbourne. It may be different across the ditch.

      • Maybe! In the various locations I’ve lived, Councils decide “How much do we need this year?” and divide that among property owners on a Land/Property Value basis. If, for instance, you chose to live in Knightsbridge with 10,000 stand alone properties, then expect to pay a lot higher council rates ( that in the UK are passed directly on to tenants to directly pay the Council!) than if you live in Croyden with 100,000 flats. Where you then choose to buy/live is then up to your calculations. The same applies in NZ, with the exception that Council Rates cannot be passed on directly to tenants and must be built into any cost recovery via rent.

      • Janet no. Not if you had an exemption.

        Council rates are a land tax. Rates do not equal provision of services in an equal sense.

        Maybe if you live in a city and are never exposed to a non city service provision environment.

        This smells like double land taxation to me.

        Would necessitate removal of income tax up to say 100k and vast concessions/exclusions for certain land holders.

      • R2M,

        Would you allow me to be given credits towards a pollution trading scheme if I recently bought a coal power station and a carbon priced is announced?

      • @fitzroy,

        When you consider that Toorak garbage bins are made from antique sandalwood sourced in the far off planes of the Himalayas, whereas Sunshine garbage bins are made from recycled syringes, it could be a very large differential.

      • Speaking of Council Rates –

        What proportion of rate-payers are aged pensioners who end up contributing significantly less in rates due to discounts that are often not means tested ? Just like income tax revenue the fed Gov’t relies on, the real burden of local council revenue generation is disproportionally falling on a diminishing population of young working Australians.

        Lack of real means-testing the Aged pension and all the other age-related benefits are ripe for reform, so Malcolm, get to it before the youth take to the streets…and then your job…

    • My landlord came around to do some repairs last year, it was around the time of a local election and in the nature strip out the front of the house he put a stake with a sign in it into the ground. It said “No Land Tax” and I wasn’t sure who put it there when I got home. So I called to double-check if he put it in, he said he was “trying to keep the rent low” and that “we the tenants” should vote for the “no land tax party”.

      Since he drives by the house I thought I’d leave the sign up until after the election. But someone else in my street ripped it out, probably another disgruntled “renter” who wasn’t impressed.

    • it would also encourage speculators to take more risk and flip homes much faster. What do you think which class of people is larger?

      why would someone not buy a house for more in a rising market when risk of losing money is much lower even if prices start going down?

      stamp duty is at the moment the only regulator in our property market

      • If it dampened prices it would discourage speculation. So in order to do this you would argue for a higher tax?”

      • how would abolition of stamp duty dampen the prices?
        It’s like FHOG now available to everyone including speculators who would always prefer amount of stamp duty spread over 10+ years because they plan to sell in few years anyway.

        replacement of stamp duty with land tax would reduce cost of speculation and increase cost of living for the large majority – is that what we want?

      • If prospective purchasers knew they would pay for example 20% of valuation as a tax there would be fewer prospective purchasers for that block. It would dampen the price. Some prospective purchasers may prefer to spend more time in Tuscany sipping chianti.

      • Land tax is a known expense. It would reduce the amount of money a bank is willing to a borrower. Hence it not mean a purchaser have more money to bid up prices.

      • Kevin, that is true, IF banks lent responsibly, and reduced loan amounts to compensate for the increased ongoing costs. Otherwise, as drx says, reductions in transaction costs (and up front developer charges) would just be pocketed by developers, leaving prices unchanged or increased, with homeowners paying increased land taxes to cover stamp duty and developer charges foregone.

        What are the chances of banks lending responsibly?

        Haha. Guffaw. Chuckle. Which bank? B1tch wank!

      • Nup Fitzroy, I am arguing for better banking practice, and suggesting that better banking is an essential prerequisite for introducing land tax.

        IF that were done, then land tax would be a good idea.

        Land tax and developer charge changes without banking practice reforms would just mean more profits for developers at the cost of home owners.

  1. I must confess that if the Malcolm Torynuffs clearly take land tax and super reform into the next election, I reckon you could see them remain in power a very long time – sailing through an economic recession indeed……

  2. Not sure who was consulted and who teh delegates were. Re Land Taxes I have a vague feeling this is a policy contrived to try to correct the stupidity created by more or less permanent NRAT IR’s. If so it would be in danger just become another piece of government interference trying to correct a market already distorted by government. i can tell you this much – I don’t think rural industries have been consulted on this…..but I suppose what the hell do they matter – we don’t need them. We only need Sydney and Melbourne! (Obviously aimed at the general concensus not at the author here)
    Note: I’m not opposed to land taxes as such. I AM worried about implementing them in a distorted economy unless some effort is made to first iron out the distortions.

  3. Charging billions of dollars in stamp duties to manage the land title system, imposes a duty of care on the states to ensure the titles they register are lawful.

  4. Farms are usually exempt from land tax. I do not see why there should be more tax on labour by raising the GST. The calls for an increase inevitably come from those who do not write the cheques.

  5. Land tax will never get off the ground. Just another red herring to hide the real problem of up coming disruption of employment by technology.
    Remember the current political sales team is in place at the pleasure of the Party.
    Muck around with land tax and you will suffer the same fate as Giodarno Bruno. (burnt at the stake by the Catholics)

      • If you guys are hungry, you can always eat grass!.
        Wow wild times during the French revolution.
        I wish our history lessons were more comprehensive. Seem that it either repeats or rhymes, a bit of reading would save a lot of learning, for many.
        I dont know what is going to occur this time around the sun, but for sure we didn’t have technology replacing jobs back then.

      • If the times become as bleak as you foretell WW, grass eating may be an option. I’m not saying your forecasts are not probable.

      • I’d better post some recipes for dandelion soup. How about clover consume’
        F we are in big trouble. Someone posted on the w/e that our debt to gdp ratio was twice that of the USA
        That obviously was historical data, and given the TOT is going through the floor, the debt to GDP will only be higher. Where the earnings are going to come from is beyond me, A service economy just keeps the money supply going. When all these diesel SUV’s get marked to market, that will open the eyes of so many of just how far up that famous creek we are, and the loss of the paddles.

      • A month ago I was in central Osaka, it was sunny, but the sky was yellow. I am sure it is like that in parts of China. We literally sell blue skies and a relatively safe society. The latter may be in the process of changing. Economically, I am a misery guts also.

  6. Two of the biggest tax policy no-brainers – reforming superannuation concessions and replacing stamp duties with broad-based land values taxes – received near universal support from business and community leaders at last week’s AFR tax reform summit.

    Really, no brainier to the extent that none has to even show why and how land tax is better or fairer or … ?
    Also, it has no support of majority of voters but that seems to be non important issue?

    I would like to see breakdown of superior features of land tax over other stamp duty with justification for all the assumptions that are usually considered obvious; e.g. why and how is higher home ownership better for an economy or a country, or whether paying less for stamp duty would just make home prices more expensive (as FHOG and lower deposit do)

    On fairness of land tax, there are few moral issues that none seems to be trying to resolve. So it would be interesting to see it in absolute terms (as if exists from beginning of time) and in relative terms (taking into account all the people who already paid stamp duty as kind of prepayment taxation).
    Someone should also explain moral issues arising from inherent regressiveness of land tax (in income terms) how would that affect low income classes. Also moral issues arising from the fact that land tax is selective wealth taxation, why would one kind of wealth be taxed and others no? How about tax on equity, cash, intellectual property?

    It seems to me that there are many issues related to land tax that requires a lot of brain power to be answered or resolved

    • Well you must be new to Macro Business, all those issues have been solved one way or another through other posts on this blog.

      • “why would one kind of wealth be taxed and others no?”

        Labrynth I’ll admit to not following every argument here to its end and this is especially so that ‘Recent comments’ has been deleted from teh menu (again why???????????????)
        However i have never seen that issue resolved. I’ve asked th question in relation to other taxes and never seen anything but dodgy baloney answers in response. So I’m not too sure it is all ‘resolved’

      • “why would one kind of wealth be taxed and others no?”

        As I understand the MB blogger position, they support widespread wealth taxes, not just a land tax.

        I believe they promote it most strongly because a land tax is the easiest to implement, most obvious, and with least negative impacts and overheads.

      • implementing tax on other wealth would be much easier, savings in bank, equities, forex holdings, and other assets with current dollar value could be automatically taxed without any need for expensive assessors frequent revaluations; depreciating assets could also easily be taxed via registrations or GST similar tax at the time of purchase

        so there is no excuse to tax only land –
        this hype about land taxation is only anachron’ Georgist ideological position, not a well reason one

        Taxing, instead, passive risk free monopoly based capital gains seems to be much fairer position but none is even thinking about it because it’s not in interest of any powerful group

    • Your doctorate must be in Parasitology, X.

      I reject your contuinued attempts to link land ownership, a form of wealth, to current incomes. The poorest, the only ones who deserve our compassion, are never put in the invidious position of being asset-rich and cash poor.

      Land tax has many fine features. The most overlooked of these is that it is entirely voluntary. Anyone who dislikes the tax can rent and never ever write a tax cheque.

      Implementing this reform after the land market turns (soon, soon) would strongly ameliorate the pain of falling land prices – exchanging a rigid transaction tax with a powerful automatic stabilizer retreating with price falls.

      The exchange of Stamp Duty for State Land Tax would end the staggering deadweight losses SD imposes on citizens. Nationwide, this is tens of billions a year.

      Don’t Buy Now!

      • -You cannot legislate the Poor into prosperity by legislating the ‘Wealthy’ out of prosperity
        -The government doesn’t give anything to anyone that it hasn’t already taken from someone else
        -You cannot multiply wealth by dividing it

        The notion that you think land tax will magically fix inequalities of wealth demonstrates your complete ignorance of capital flows. Go back to mother Russia comrade.

      • You you are fine with tax on wealth even if it doesn’t generate income? That would be the same as taxing savings?

        so the poor working class who worked all their life, paid income tax and SD and than saved just to buy a house in the cheapest suburb deserve to be punished and forced to move out onto the rental market at the fool mercy of greedy and arrogant landlords who just got their speculation cost lowered by abolition of SD?

      • Under Marxism. government owns the means of production and exchange – which includes the land. I want universal private land ownership – much more than you do. The means to that goal is to untax labour, untax enterprise and tax the land.

      • @NMT

        Some people still live in feudal times when almost all wealth and income was generated from the land. They seem to be not aware of century and a half of history after Henry George.
        They also forget that at the time when he was getting his idea there was no income/wage taxes or they were deemed unjust.
        Wanting a land tax in a world where land plays minor role in income and wealth accumulation (beside occasional bubbles) and time where most of revenue is generated from wage taxation is a sign of being completely out of touch with reality.

      • If you have to pay a tax on land for fear of asset seizure……then you don’t own the land in the first place. There is no way in hell income tax will be removed because it is used as collateral to guarantee National Debt, which granted should not technically exist.
        Given ‘Money’ is no longer linked to a tangible asset, please explain the need for physical collection of ANY tax, including land tax at all?

      • -You cannot legislate the Poor into prosperity by legislating the ‘Wealthy’ out of prosperity
        -The government doesn’t give anything to anyone that it hasn’t already taken from someone else
        -You cannot multiply wealth by dividing it

        Come on, just a couple more and I’ll have filled out my “meaningless right-wing rhetorical catchphrase” bingo card for today !

      • @ david collyer

        under Marxism only productive tax (the one that generates income) was publicly owned.

        I don’t get that obsession with land, why you do want to tax other wealth? how about other monopoly wealth like intellectual property, licences or exclusive rights for example?

      • @ DrSmithy, I note you couldn’t disprove any of those statements so you resorted to a pithy yet utterly idiotic response. Well done.

      • @ david collyer

        you are confused again

        At the moment there is no tax on any monopoly that doesn’t create income, Natural Resources , intellectual property … is only taxed if and when it creates income

        broad based land tax would tax land that doesn’t create any income

      • “The poorest, the only ones who deserve our compassion, are never put in the invidious position of being asset-rich and cash poor.”
        Provably false.

      • I note you couldn’t disprove any of those statements so you resorted to a pithy yet utterly idiotic response. Well done.

        They can’t be “disproven” because they’re empty rhetorical claptrap. They got the response they deserved.

        #1 is a straw man.
        #2 is circular logic (one of the core functions of Government is redistribution).
        #3 is simply wrong.

      • doctorX says: ‘broad based land tax would tax land that doesn’t create any income’.

        What land does not generate income?

        Land might not generate income because it is remote, has poor soil, etc, and neither the owner nor anyone else can do anything with it. The value of this land will be low, even zero. Hence the land tax payable will be low, or zero.

        Land might not generate income even though it is well-located and potentially productive, because its owner has chosen not to put it to productive use. The value of this land will reflect what other people could do with it, and may be relatively high. Hence the land tax payable will also be relatively high, thereby prodding the owner to do something productive with it – or sell it to someone who will.

    • Land tax is immensely fair. It encourages greater workforce mobility, it encourages land to be used far more productively but perhaps most importantly it is fair. Currently the income rich asset poor pay when they pay their tax, that money goes into funding infrastructure. That infrastructure increases the value of a property. Surely the property owner should meet the cost as they are receiving the benefit.

      Churchill first entered parliament on a platform of government buying the bridge linking east London. All the poor in East London rented, so by removing the toll they would have more money in there pocket. He won, he used taxpayer money to buy the bridge and then all the landlords increased rents in east London as everyone had more money. The Poor where no better off but the landlords where.

      It stuck with Churchill forever and he often described property as the ultimate monopoly. With 75% of Australia’s wealth tied up in property not productive businesses a land tax will encourage capital into productive businesses which actually employ pep

      • Why not taxing land capital gains instead, it’s simpler, it’s fairer, it’s progressive, it would reduce land prices making it more productive, low prices would encourage mobility, and on top of all of this we would avoid all the moral and social issues from broad based land tax introduction (none would be forced to sell, it would not provide benefits for property speculators, avoid moral issue of double taxation (SD and land tax) … etc, speculators would lose all the speculative gains, asset rich income poor would pay when they sell or their children would pay after they die

        Taxing land capital gains is the fairest way of dealing with issues you described and many more issues like zoning changes, building approval issues (NIMBY), …

        Just make CGT on land 90% and all issues fixed: price would go down significantly improving productivity and mobility, speculators would disappear overnight, current owners would not be financially rewarded for the improvements in infrastructure financed by everyone ….

      • No it is not. Why would I sell and realise a Capital gain? Why do you think Warren Buffet does not sell his stock? If you can be bothered read up Stan Druckenmiller’s thoughts on this issue (around stocks not property but the concept is the same) If I am drawing income from an asset and it has appreciated in value I am far better off borrowing against it if I need cash instead of selling it and paying capital gains tax.
        Land tax forces people to make a decision do I need to live in a house this big? Is this the most efficient use of my money? It provides a more consistent government revenue stream and it means they are being paid then and there for the government built infrastructure not on some future sale that may never happen.

        Finally Capital gains in a federal tax whilst land tax would likely be a state tax. Seeing state governments build most infrastructure this too is fairer. Being a state tax it would also encourage greater competition between states for capital

      • If I am drawing income from an asset and it has appreciated in value I am far better off borrowing against it if I need cash instead of selling it and paying capital gains tax.

        But there is no 90% capital gain on equities and that’s why you could borrow against it and still be better off. The issue here is issue of non-income generating land that land tax targets. That land is form of saving not investment and as such should provide cash when needed instead of forcing people in need to sell. It also means that people would have funding if they want to invest into something productive while high CGT would make speculative property not worth investing in.

        It provides a more consistent government revenue stream and it means they are being paid then and there for the government built infrastructure not on some future sale that may never happen. Inheritance could be easily adjusted to include only the original purchase price (plus maybe some credits) effectively making all asset transfers CGT events. and there is nothing more consistent on this world than death.

        Finally Capital gains in a federal tax whilst land tax would likely be a state tax. Seeing state governments build most infrastructure this too is fairer. Being a state tax it would also encourage greater competition between states for capital
        this is just a bureaucratic argument. A single piece of paper could change this in three seconds to make CGT on land state tax or force federal government to pay for all infrastructure.

      • “It encourages greater workforce mobility, it encourages land to be used far more productively but perhaps most importantly it is fair.”

        1. Prove mobility.
        2. Fair is subjective.

        Your idea of fair and Gina Rineharts idea of fair differ markedly (most likely)

        Everyone needs to stop assuming rational actors. No such thing

      • “A single piece of paper could change this in three seconds to make CGT on land state tax or force federal government to pay for all infrastructure.” So say I have a large capital lose on a share sale. I use that to offset the capital gain I make on the land sale, so the state government ends up with nothing. A CGT opens itself up to all sorts of manipulation. A Land tax is far cleaner and as I said a far more consistent revenue stream under your plan we need to wait for people to die. Then as you propose the beneficiary of an estate pays the CGT but what if the property is held in a trust or a corporation? We now have to change the corporations law and trust laws when their adminstration changes. What happens if they are offshore entities. What a nightmare to administer. Plus even if the owner is a single person a CGT on the person’s death would equate to an inheritance tax which is electoral poison.

        Also you are going to be in for a world of constitutional pain saying the fed’s pay for all infrastructure. It will take election pork barrelling to a new high. We want competition between states for capital not Canberra dolling out money on white elephant projects to win elections.

      • Note to. I suggest you read much of the work done by Prosper Australia, and most of the bloggers on this site if you do not get how a land tax encourages mobiltiy and is fair. There are many reasons that they will do a better job of explaining than what I could and I would encourage you to read their work. But essentially the major reason is this. The transfer costs for property (stamp duty) means when you buy a property you need its value to increase to cover this cost. The longer you hold the property, the less the stamp duty cost is relative to the capital gain. You are therefore incetivisted to remain in the same place for longer. By reducing transfer costs the market becomes more liquid and you are more likely to move to pursue opportunities as a result.

      • @ Heisenberg making CGT on land being tax on special rate (e.g. 90%) would clearly also mean that none would be able to reduce it by some other losses taxed at different rate (general income tax rate).

        Issue with land owned by trusts or corporations could easily be fixed by some setting some other CGT trigger (e.g procedural, or value based). Regarding your comment who pays for infrastructure it’s quite clear that we are talking about a hypothetical situation – it will be politically easier to change our constitution and state/federal tax distribution than to introduce broad based land tax. So the argument that my idea is bad because is hard to implement is pointless.

        And on land tax and mobility, high CGT that discourages speculation would not only make prices significantly lower but would also allow abolition of SD. So it would be better for mobility than land tax proposal. Ultimately following your logic, the ideal would be to completely discourage or even penalize home-ownership because renting is much better for mobility.

      • ” CGT on land being tax on special rate (e.g. 90%) would clearly also mean that none would be able to reduce it by some other losses taxed at different rate (general income tax rate).”

        I am trying to figure out what you mean by this? Why could you not offset it against other loses? If I have to pay 100K in CGT and lost 100K in the share market then one offsets the other and I pay zero.

        Then some random trigger based on valuation that you have to pay CGT for corporations and trusts so if the property goes up say 30% you pay CGT? What happens if it goes up 30%, you pay CGT and then it goes down 80%. Then you are forced to sell? What happens in a hot market and all of a sudden you get this massive tax bill you could of never of predicted arrives. All of a sudden you need to sell the property pay CGT and close your business. The CGT means you do not have the money to buy into the same market. – Talk about sovereign risk.

        With a land tax you have consistent, minor cost YOY you can budget for. There is no way a business can budget for what you are proposing.

        You may think a land tax is politically hard but reform is hard. Remember it will be coupled with removing stamp duty, reducing pension expenditure and freeing up the economy so capital goes to where it is needed. That is a very powerful reform to sell

      • I want to join in this debate. Land tax is great. I want to buy a cheap house near my place of work, install air conditioning, decent internet cabling and what not. Then if I move jobs in 2-3 years (which is common in my field) I would like to once again buy close to my work place. With the current system, those who wish to be mobile are punished and forced to rent out their homes and rent somewhere else or pay over a year in savings for the privilege of moving house. Its ridiculous.
        And yes savings is taxed. You pay tax on the interest you earn as income. Land is wealth and it should be taxed.

  7. It doesn’t matter if someone paid Stamp Duty last week and today it’s axed for Land Tax! Think about it. You paid Stamp Duty, right? Where did it go? To the Government. When you sell that same house next week, where will the ‘missing’ stamp duty component go? To you! (Remembered the rational: How much have I got + what can I borrow = What can I buy! That equation doesn’t have ‘tax’ in it anywhere other than the implied Net Payable amount)

      • I agree, in principle, but will have a dig at one point.

        The economics is 100% sound (despite those like doctorX and NMT who use obfuscation rather than counter-argument – a tactic used by denialists in most fields), but the practicalities of Janet’s approach are fraught.

        Indeed, replacing stamp duty with land tax will have a negligible impact on the aggregate purchase price (i.e. the price increases to replace the gap left by the departing duties). Those who just spent $50k on stamp duty will see a $50k increase in the value of their recently acquired asset. Sweet.

        However, cash flow is king. Those home buyers on the margins of serviceability (which is suspect is quite a few) will typically budget for: 1) interest payments, 2) council rates, and 3) bills etc. Those households will care very little for the paper-value increase in their asset price, when suddenly they have to find an additional $2,000 p.a. on an unforeseen Land Tax bill.

        If you are unable to address the problem of cash flow, this tax reform will not work.

      • “Those who just spent $50k on stamp duty will see a $50k increase in the value of their recently acquired asset. Sweet.”
        Nup! The value is likely to go down as the annual net benefit is less by the amount of the Land Tax. When this is discounted into teh price they are more likely to see a negative $50K

        This doesn’t argue about the desirability or not of Land Tax. However it does weigh on equity initial questions

        OK I grant the point from doc x below about the ability to borrow. However we need to be careful about assuming that everybody will borrow to the max. In addition to interest payments there will be Land tax payments which affects the disposable income and the ability to borrow!
        No simple solution though so some of the dogmatic statements ought be cautioned

    • so ultimately it will increase house prices providing nothing to young who want to buy while driving them more into the debt and than taxing them until the end of the world and rewarding speculators with lower costs and higher capital gains

      sounds like a good plan

      • Exchanging Stamp Duty for a universal nil-exemption State Land Tax will be a welcome boost for FHBs. In fact, that starter home may actually make economic sense, rather than being squandered in SD payments. The best analysis of the consequences of this exchange is by Wood & Ong. I recommend to all:
        http://www.ahuri.edu.au/downloads/publications/EvRevReports/AHURI_Final_Report_No182_The_spatial_and_distributional_impacts_of_the_Henry_Review_recommendations_on_stamp_duty_and_land_tax.pdf

      • On a Net Basis, real property prices will be unaffected. The FHBer will still have the same amount to spend, even if it’s on the same house! The ‘sticker’ price may have a one-off change, but the commodity for savings/debt exchange will be unaltered. Any buyer will still have the same amount to spend on the same house, it’s just a matter of where the initial Bullet Payment goes. Does it go to Government or does it go to the vendor, to compensate them for the S/D they have already paid? “But there will be a comparative price escalation for New Builds who will be able to sell at a higher rate against existing dwellings?!” Maybe, but aren’t we trying to encourage New Builds, anyway. Regardless, we have to start somewhere….or we never will. And that, will spell disaster for everyone. Existing owner and FHBer alike….

      • @ Janet

        You seem to be forgetting effect of leveraging. Reduction in initial costs by SD would enable buyers to leverage and pay for a house much more than SD. And that money would go to to the existing owners effectively creating additional transfer of wealth between asset owners and wage earners.

      • Lets consult with the Real Estate Institute to see if they like it, they always like policies that help the little people.

  8. In a country where two-thirds of the voting populace are ‘home owners’, I really can’t see a land tax gaining any serious backing from either side of politics. Doesn’t matter how efficient it is, political reality needs to be accepted. Super reform on the other hand….

    • If they are going to move in income tax at the same time it could work.
      You’d sell it as a massive income tax cut.

      • Yeah maybe – it would have to be that radical. See Explorer’s comment just below as evidence of my initial skepticism….

  9. Everyone who owns a house/apartment or other property has paid a stamp duty on transfer. That means about 65% of the voting population. Who cares what business thinks about adding a new tax on all these people by starting to charge a tax on the property when we have all already paid the stamp duty up front? A new tax would amount to double taxation on the same property.

    But if states only apply the annual tax on new sales they will have a big deficit for about 5 to 7 years as the taxes on transfers stopped.

    While there might be some inequities in stamp duties (it’s the same whether you hold your house for 1 or 40 years) there are huge transition costs that would be paid by the great majority of voters.

    I will certainly campaign against any new tax on property that doesn’t give me full credit for what I have already paid on my currrent property. Lots of voters will join me, including most small business owners.

    • Join the ‘No Land Tax Party’ they seem really sane. Reality is as a land owner you receive huge subsidies the best of which is no capital gains tax (assuming it is your primary place of residence). The great majority of voters will benefit from a land tax as capital will be employed far more efficiently in Australia. Worthy private enterprises will receive funding, employing those very voters and improving living standards. Pensioners etc who are living in huge houses will be forced to downsize, this will give them extra cash which they can use to fund their own retirement instead of the majority of voters paying taxes.

      • No offence to you personally, but I suspect you are utterly wrong.

        When I read grandiose statements that “business *will*” this and “society will” that I am completely skeptical.

        No rational actors, people not acting in society’s benefit.

        The extra money will go on continued property speculation unless there are tax incentives for R&D and Venture Capital for the masses.

        And this statement is just so full of assumptions as to render it nonsensical
        “Pensioners etc who are living in huge houses will be forced to downsize, this will give them extra cash which they can use to fund their own retirement instead of the majority of voters paying taxes.”

      • No investment in R&D will happen when you can get 20% rate of return from land speculation, My boss made more profit from developing and property in a few year than 30 years of running his IT business.

      • Money is like water and it flows to the path of least resistance. If you can get a better return investing it a productive business, instead of a property which sits there and has a holding cost (land tax), then rational actors will sell the property and put the money in a productive enterprise. Currently holding land does not cost you anything so you can just sit on it and wait for capital growth. If it is costing you money that is a different story.

        I can have such cetainty because government had such certainty that by favouring property in our tax system it would push up its price. If government policy can force capital to be used inefficiently it can of course force it to be used more efficiently

      • I cannot make sense of what you are saying. Land tax is a tax on renters at present and it will allow governments to take your home off you is you become unempolyed, have a low income or you become disabled

    • Land tax AND stamp duty are two different taxes : saying it is ‘double taxation’ is illogical. What is being proposed is to exchange one bad tax for a better one. It is also possible to have both stamp duty and land tax.


    • Everyone who owns a house/apartment or other property has paid a stamp duty on transfer. That means about 65% of the voting population.

      So if falling home ownership levels meant there were one or more marginal electorates with less than 50% home owners there may be little political cost from upsetting people who have paid stamp duty if it means rewarding non-home owners.
      Better be lots of first home buyers out there, then.