What the government gives with one hand, the housing market will recover in part with the other.
Unfortunately, Perrottet’s policy falls far short of the most ambitious proposal he made last year. This plan would have offered buyers in 80 per cent of NSW homes the option to pay an annual land tax, including people who had previously owned homes.
Worst of all, this week’s announcement does nothing to facilitate the move of the current owners.
And it would have offered a similar option to commercial and agricultural property owners.
Worst of all, this week’s announcement does nothing to facilitate the relocation of existing homeowners, which is the main reason for the stamp duty reform in the first place.
The stamp duty is a bad tax because it discourages homeowners from moving house as their lives change, as doing so would mean having to pay stamp duty a second time.
Fixing this issue is key to capturing the estimated $ 10 billion annual economic dividend from the NSW Treasury’s long-term stamp duty reform.
Nor do the reforms announced this week put NSW on the path to permanently replacing the stamp duty with a land tax.
The worst of all worlds
Perrottet’s previous proposal provided for an acceptance model as a way to gradually move all properties to the land tax network. Once someone decided to pay land tax instead of a property stamp duty, they would be subject to land tax even after selling it.
But according to the policy announced this week, even when first-time homebuyers choose to pay the new land tax instead of the stamp duty, those homes will not be subject to property tax. land once sold to another buyer.
Instead of taking the first step on the road to broader stamp duty reform, the Prime Minister is leading us to a dead end.
Even more disappointing was the reaction of NSW opposition leader Chris Minns, who declared his opposition to a “tax on every house forever”.
Instead of a bipartisan approach to major economic reform, we find ourselves in the worst of all worlds, with an opposition committed to opposing a policy that the government has not even promised to enact.
The gap between the prime minister’s ambitions and Tuesday’s announcement is partly due to a lack of federal support.
The prime minister’s public requests for the federal government to help fund the transition, justified by the fact that Canberra would raise most of the additional tax revenue from a larger, post-reform economy, were received with deafening silence from the government. former federal treasurer Josh Frydenberg.
New treasurer Jim Chalmers indicated he was open to the idea, but it all came too late.
Without federal support, the NSW government ruled that the state could not afford to do it alone.
Instead of following NSW’s approach, other reformist zealous state prime ministers should look to the ACT, which is now 10 years old on a 20-year plan to phase out the stamp duty by gradually replacing it with a broad-based property tax.
The adoption of the ACT model would ensure that any state has sufficient revenue during the transition. And any future federal support could be used to provide credit to recent buyers in exchange for shortening the phase-in period of a land tax.
A serious stamp duty reform in our larger state will have to wait. And we will all be the poorest for that.