The Centre of Policy Studies at Victoria University has published new modelling showing that switching from property stamp duties to broad-based land taxes would deliver big productivity benefits to the nation.
According to the modelling, after 20 years replacing stamp duty with land tax would boost national income by $0.30 for each dollar of revenue swapped, or up to $720 per household if implemented Australia-wide, equating to about 0.34% of annual gross domestic product (GDP):
The results in column [3] of Table E1 allow us to rank the taxes studied according to the welfare benefits that arise from small tax rate reductions. In Table E1, we rank our taxes from the most distortionary tax, which generates the largest benefit when its rate is reduced (shaded red), through to the least distortionary tax (shaded green). From Table E1, we see that a permanent reduction, implemented today, in the rate of TD [transfer duty] on transfers of existing houses would improve welfare by 132 cents per dollar of revenue foregone by 2040. This is the largest benefit generated of all the taxes we study…
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Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
