The Photocopier From Hell
Given the daunting task facing Governments to either craft new policies — or adopt those of others — there’s clear incentive for Ministerial advisors to simply crank up the photocopier. A few tweaks, of course, so the local Parliament can at least lift its leg on the new law. Fundamentally, however, Xerox does the heavy lifting.
There’s great efficiency in this — provided the original policy is well thought through, and steers a sensible course around the ever treacherous shoals of vested interests. But there is also great risk. If the original policy sucks, then what comes out of the photocopier can be guaranteed to suck as well. Which brings us to the marvellous idea hatched by the New South Wales Government to abolish stamp duty.
This played beautifully as a headline in their proudly announced State Budget last month. Who among us wouldn’t want to see a tax abolished? On the face of it, a spiffing idea.
Governments do sometimes abolish a tax. But you can take it to the bank they’ll immediately replace it with a new more fiendish levy designed to further drain our pockets. Governments always want more. Never, ever, less.
It should therefore come as no surprise the other quieter part of the proposed New South Wales policy is to introduce a land tax on almost every property.
Here’s the beauty of it. Home turnover rates, particularly in NSW and Victoria, are at 20 year lows, and politicians — no slouches when it comes to raising revenue — suspect this might partly be explained by their huge Government stamp duty impost. On an average Sydney home this is around $70,000. Not surprisingly, it discourages sales, and that means infuriating stamp duty delays.
Under the proposed new model, buyers will get to choose to pay stamp duty or a forever after annual land tax on the property. — even if it’s a family home and, until now, land tax exempt.
Faced with ponying up $70,000 or more, straight away, politicians are betting we’ll all eventualy opt in for what might look like the less painful annual option. And once a buyer opts for land tax, that property is in the land tax net forever.
This potential fall in the up front price of buying a home will increase the number of sales every year — they hope — thus lining the pockets of their mates in the real estate, renovation, and other industries.
There are two other marvellous advantages — for them, of course — not us.
If stamp duty on a typical property yields $70,000 once every 20 years — the equivalent of about $3,500 a year — then why not set annual land tax at, say, $4,000 a year? And if not now, then next year, or the year after that?
Even better, the annual impost will force some out of their homes altogether. Fixed income earners, for example, unable to afford an extra, un-budgeted, annual slug. So, the government gets more of our money — and they get it faster.
The second advantage is even more fiendish. Land tax is based on the value of the land — and guess who does the valuation? Anytime they’re a bit skint, all they have to do is whisper in the ear of the Valuer General. “Nothing to do with us,” they’ll bluster. “It’s him wot done it.”
All of this is still out for “discussion”, but we know that usually means the fix is in.
Interestingly, they’re proposing to stick with stamp duty for the very top end of the market. Which means the math must show they make the most money that way. For the rest of us, they’ve clearly decided they make the most by introducing land tax.
This lurk is so clever you should watch this space with vigilance for your own State Government to announce they too are looking to abolish stamp duty.
And they’ll barely have to lift a finger to achieve it. The shining example of New South Wales — and the photocopier from hell —will have done everything except collect the cash.
I’m #philackman and this is a #philackmanarticle originally to air on #cairnsfm891