Reforms need stamp
THE looming possibility of a recession, the sea of debt that Australia is sinking into, and the reform laziness of successive governments, federal, state and territory, mean that the next few years should be the time for governments to embark on a reform agenda the likes of which we have not seen since the 1980s to the end of the 1990s when the Howard government introduced the GST.
The tax system is full of rorts and this state of affairs means the wealthy pay little tax. Stamp duty inflates the prices of real estate and is a constant sugar hit to state budgets when prices are high.
Now is the time for bold reform. On land tax, NSW Premier Dominic Perrottet’s government embraced last week modest reform, and the ACT government has been heading down that path for a few years.
Sadly, in Tasmania, the Liberal governments since 2014 have not pursued any tax reform agenda, and former premier Peter Gutwein ruled out abolishing stamp duty and replacing it with land tax two years ago when Mr Perrottet, then treasurer, raised the issue.
And at the federal level, let’s put an inheritance tax on the table.
As Bill Handbury argued on these pages last Monday, the new Labor government, facing a budget mess created by the big-spending and fiscally irresponsible treasurer Josh Frydenberg, has “a mandate to say all estates over $5m will pay death duties. Fairness will never be regained in Australia until this tax is legislated. That billionaires can leave their children obscene wealth is an anathema to fairness”.
And there is no reason why such a tax should not be imposed by the Tasmanian government.
The recent budget has seen debt blow out, no tax reform on the agenda, a declining property market and, of course, the likelihood that a global recession will hit this state harder than most, as it always does.
Saul Eslake, the prominent economist, in an interview with the Sydney Morning Herald earlier this year, said that such a system would offer a choice to (the relatively small number of) wealthy Tasmanians: leave a relatively small part of your estate (less than one-fifth, for the largest estates) to “worthy causes’’ in Tasmania, or pay an equivalent amount in estate duties.
Most, if not all, Tasmanians would likely choose the former option, and a large proportion of the Tasmanian community would thereby indirectly benefit through the work that the recipients undertake.
Of course it would mean both the Liberal Party and ALP taking on the rich and powerful, something they are loath to do.
At the federal level an inheritance tax is efficient.
The Australia Institute has outlined a sensible proposal. In 2016 the Left-leaning thinktank argued for one mode that “would exempt everything up to $2m and impose rates of 20 per cent thereafter and 30 per cent above $10m. The estimated revenue boost would be $5bn per annum”.
The institute estimated the tax would raise about $5bn a year.
Abolition of stamp duty is another must-do in a fiscal reform debate.
Mr Perrottet has argued stamp duty on property transactions is the “worst tax a government can make”.
Mr Eslake told the ABC recently: “There’s something really unfair about a system of property taxation that expects people who, for whatever reason, move four or five times in their lives, need to contribute a lot more to the cost of providing teachers, nurses, police and other state government services than someone who happens to live in the same property for 30 or 40 years.”
Then, of course, there are myriad middle-class and wealthy tax giveaways that help to perpetuate the increasing inequality between generations in Australia.
Michael Keating, the former head of Prime Minister and Cabinet, writing in The Conversation on May 26, says that the Albanese government should drop the Morrison government’s wasteful and extravagant so-called Stage 3 tax cuts.
“These Stage 3 cuts cost $15.7bn in their first year (2024-25), climbing to $37bn per year in 10 years’ time. Very few taxpayers will notice, because they are directed towards the 10 per cent of taxpayers with incomes greater than $120,000,” argued Keating.
In other words, tax cuts for the middle class and the wealthy.
Sadly in Tasmania the Liberal governments since 2014 have not pursued any tax reform agenda
Tough economic times are the opportunity for politicians to be courageous and to do the right thing.
We saw it with Bob Hawke and Paul Keating in the 1980s, with Peter Costello in the late 1990s, and in the context of Tasmania with the governments of Michael Field, Ray Groom and Tony Rundle between 1989 and 1998. In New Zealand Roger Douglas transformed an economic basket case into a dynamic economy in the 1980s and 1990s. It’s reform time again.