Treasurer Scott Morrison has thrown his support behind the states switching from stamp duties to a broad-based land tax, but has ruled-out providing any federal government assistance. From The AFR:
Federal Treasurer Scott Morrison continues to support the states swapping stamp duties for a land tax on every residential property but insists making the move is up to individual state governments.
Following a report on Sky News on Sunday that Mr Morrison would be pressing the states to adopt the change in the lead-up to next month’s state and federal Treasurers’ meeting, a spokesman for Mr Morrison said he was already on the record supporting the change…
“I welcome the fact that in NSW they’re looking at issues which would rebalance their tax base which … would improve housing affordability in that state. That’s the sort of discussion I was hoping to initiate with my speech earlier this week,” Mr Morrison said.
One wonders why the federal government is willing to provide incentive payments for the states to sell-off their assets, resulting in some spurious privatisations, but will not consider providing similar incentive payments to switch-out stamp duties for land taxes?
The Australian Treasury has already shown that stamp duties on real estate are one of the least efficient taxes going around whereas land taxes are the most efficient source of tax available, actually creating positive welfare gains to the domestic population since non-resident home owners are also taxed (see below chart).
The Henry Tax review came to similar findings.
Given that there is a productivity pay-off in switching-out the taxes – some of which would flow to federal government coffers via the broader tax system – then it makes sense for the federal government to provide incentive payments to facilitate reform.
Scott Morrison’s recent housing affordability speech also pinned the blame for Australia’s housing affordability woes on supply not keeping-up with demand. Part of this problem relates to the mis-match between supply and demand created as older empty nesters occupy most of Australia’s family friendly homes, whereas younger growing families are forced to live in ill-suited units and apartments.
Abolishing stamp duties in favour of a broad-based land tax would obviously remove the penalties currently attached to relocating while incentivising households to move to more appropriate houses or employment. In turn, there are likely to be benefits to congestion and commuting times as the housing stock is utilised more efficiently.
If Scott Morrison genuinely cared about boosting overall productivity and housing outcomes he would put replacing stamp duties with land taxes near the top of his agenda and provide financial incentives to the states to ensure that reform gets done.
