Interesting article by Robin Christie | 16 Jul 2015
Property levies could be the key to fixing state and territory budgets, and could raise as much as $7 billion a year, the Grattan Institute has claimed.
Grattan’s ‘Property Taxes’ report…..explores how imposing a broad-based property levy could help Australia’s state and territory governments to boost their deteriorating budgets.
According to the report, a levy of just two dollars for every $1,000 of unimproved land value would raise $7 billion a year.
…….While it accepts that property taxes can be unpopular because they are highly visible and hard to avoid, it states that they are also both efficient and fair. In addition, it argues that property taxes don’t change incentives to work, save and invest.
“Our proposal is manageable for property landowners, and protects low-income people,” said Daley. “Low-income retirees with high-value houses could defer paying the levy until their house is sold.”
Key points
According to the paper, other key arguments in favour of property taxes include:
Unlike capital, property is immobile – it cannot shift offshore to avoid taxes.
Over the last 25 years, taxes on property and property transactions have been the only significant growth taxes for states, with revenues keeping pace with the economy.
Shifting from stamp duty to a property levy would provide more stable revenues for states, and add up to $9 billion in annual GDP.
“Concerns about the risks of multinational tax avoidance, the increasing mobility of capital around the world, and the increasing value of residential property relative to incomes, should make property taxes a priority in any tax reform,” states the paper.
“Higher property taxes could also be used to fund the reduction and eventual abolition of state stamp duties on property. Stamp duties are among the most inefficient and inequitable taxes available to states, and their revenues are inherently volatile.”
Abolition of stamp duties would remove the temptation for State governments to restrict land release, driving up prices in order to increase stamp duty revenue. But high prices act as a deterrent for young families to purchase their own homes. Land taxes instead would create an incentive for states to release new land for development, widening property ownership and their tax base.
Read more at Could a new property tax save the economy?.