Stamp duty bonanza: Pete Wargent
Stamp duty isn't a much admired tax.
Except by governments that is!
The arguments against stamp and transfer duties include that they discourage labour force mobility, while making life challenging for first home buyers.
It's not hard to see why governments like them, though.
Over the year to February 2017 the NSW Office of State Revenue (OSR) alone recorded astronomical receipts of $9.4 billion.
Stamp duty is now accounting for more than a quarter of state government revenue in NSW.
I noted last year how the NSW government has smashed its budget targets to leave itself with net debt of less than zero for the first time, largely thanks to this remarkable windfall.
A proposed alternative would be to put an annual tax on the unimproved value of residential land, including for the family home (there is already a land tax threshold in place, but it doesn't capture all homeowners due to an exemption on the family home).
The main challenge is that with residential land values in New South Wales of $1,657 billion, the annual tax would have to be quite significant to raise the equivalent $9.4 billion.
Recent proposals have included an annual land tax of 0.75 per cent.
There are now just over 3 million dwellings in New South Wales, so another way to look at it is that households and owners of other residential dwellings may have to stump up on average $3,100 per annum to raise the equivalent amount of tax.
A proposed land value tax would typically deliver comparatively little pain for those living in an apartment, since the land value content of such dwellings is relatively low.
On the other hand I think of the retirees on my street who now have very valuable land under their homes, for which the annual land tax bill would be impossible for them to pay.
So the argument goes, by taxing people on their homes they will be 'incentivised' to move somewhere smaller and more appropriate for their needs.
It could certainly happen over time, though it would be a brave move politically.
PETE WARGENT is the co-founder of AllenWargent property buyers (London, Sydney) and a best-selling author and blogger.
His latest book is Four Green Houses and a Red Hotel.
