Scrapping stamp duty makes economic sense
It’s never been easier to run a scare campaign in Australian politics. As technology speeds up the media cycle, populists and conservatives benefit, and long-game reformers have to work harder to persuade the electorate.
But the purpose of politics isn’t winning elections. It’s about leaving the country a little better off than when you came into office.
Which brings me to tax reform. If you lined up a dozen public finance experts, you’d be hard-pressed to find one who would tell you that stamp duty was a good tax. Stamp duty pushes up house prices, keeping young people locked out from the real estate market. It discourages mobility, preventing people from moving closer to their place of work. Stamp duty also discourages families from downsizing – so we’re left with retiree couples rattling around four-bedroom homes and young families confined to two-bedroom apartments.
That’s why Ken Henry’s comprehensive 2010 tax review recommended scrapping stamp duty – a proposal backed by most of the experts who attended the 2011 tax forum in Parliament House. As the Australia Institute’s Richard Denniss noted recently, the NSW Liberal Treasurer has described stamp duty as one of that state’s ‘most inefficient’ taxes.
Moving from stamp duty to land taxes is good economic policy and good housing policy. It makes better use of our housing stock, reduces commuting, and will help raise living standards. Given all this, it’s sad to see the ACT Liberals playing haunted-house games rather than engaging in a sensible conversation about tax reform. If the Liberals say that NSW stamp duty is a bad tax, why do they suddenly defend ACT stamp duty?
Canberra’s high living standards and quality of life haven’t come by accident. They’re the product of far-sighted decisions by past governments, who have been willing to focus on the future. In setting out a plan to scrap stamp duty, ACT Treasurer Andrew Barr would have known the possibility that his opponents would try to mislead voters. But he also knows that you don’t deserve to represent your electorate if you shirk the big issues.
The ACT Liberals’ claim that rates will triple is a furphy. But as someone who believes passionately in tax reform, what really riles me is that they’ve responded to a serious economic debate by throwing a white sheet over their head and shouting ‘boo’. Canberrans deserve better.
Andrew Leigh is the federal member for Fraser, and is writing a weekly column on the ACT election from a Labor perspective.