Comments on: Taming the geese

By: Nicholas Gruen

Nicholas Gruen — Tue, 30 Jun 2009 14:28:01 +0000

Thx for the post Bruce. And good practical advice. The other political issue that’s important is that stamp duty is very occasional. I often think the health system can be as bad as it is because we only run into it occasionally. Things that are pervasive in all our lives tend to be done more effectively if not efficiently – like garbage disposal.

By: Patrick

Patrick — Tue, 30 Jun 2009 05:18:49 +0000

I think DD is pretty much right. Bruce’s bit about liquidity is certainly a practically important point.

However, part of that sounds like history-by-making-it-up about stamp duty. Historically stamp duty is surely favoured because, leaving aside specific issues of avoidance and interpretation, it is dead easy. They come to you and give you the money, you don’t have to do anything. If they don’t they don’t have a contract (or not an enforceable contract, which may as well not be a contract).

Pedro, yes the incidence of the tax is on buyers. But that argument is an argument for making sellers richer. Also, absent the special favoritism of residential property in the federal tax system, (and ignoring the rapidly growing non-taxable sector), you would be increasing income tax receipts by between 15% and 47.5% of the stamp duty receipts foregone.

By: pedro

pedro — Tue, 30 Jun 2009 04:04:40 +0000

I recall reading more than once that any abolition/reduction of stamp duty would flow through to higher prices for land, which I think is probably correct. So transfer duty is effectively paid by vendors. Beyond that I can only speak for myself and acquaintances in saying that the “price” for a house is the contract price plus duty and that is how a bid price is assessed.

By: derrida derider

derrida derider — Tue, 30 Jun 2009 03:22:18 +0000

Among old tax hands there is a saying – “the only good tax is an old tax”. That’s all you need to know to explain why tax reform is politically hard.

Of course we already have a land tax on residential land – council rates. If I were a pollie trying to sell abolition of stamp duty funded by an ongoing land tax, I’d label the new tax a “rate surcharge” and tack it onto this system. Even so it’d be a tough sell. You’d certainly have to continue the practice of many councils of deferring collection of the rates until elderly occupants die and you can take it out of the estate – which is a good backdoor death duty.

And I agree with Gans that Gittins has mised the point about non-financial incentives. It is the *margin* that matters for policy, and at the margin financial incentives have a demonstrable effect on mobility – which is quite consistent with non-financial considerations being more important to most such decisions.