Increasing GST: not worth the effort. How about inheritance taxes?

I posted this analysis in December, suggesting that, once the necessary compensation is paid for, an increase in GST wouldn’t be worth the effort. Apparently Treasury modelling (which I haven’t yet located) produces the same conclusion. Given that everything is supposedly on the table, maybe it’s time to look at some new options. An obvious example is inheritance taxes, which raised a fair bit of money before being scrapped in the late 20th century. As the inequality of wealth increases, the case for such taxes becomes every stronger.

Repost

The Grattan Institute has just released a report suggesting that the government should get more revenue from the GST, either by broadening the base to include food, health and education (yielding an extra $17 billion) or by raising the rate to 15 per cent (yielding an extra $27 billion). As you’d expect from Grattan, the analysis is sound and careful. As long as you accept the standard framing of the tax reform debate, in terms of the need to shift from direct to indirect taxation, it is reasonably convincing.

Grattan suggest using 30 per cent of the extra revenue to increase welfare payments and 30 per cent in cutting the bottom two tax rates, thereby compensating low income earners. The overview concludes:

Around 40 per cent of the additional revenue from a higher GST would be left over after welfare increases and tax cuts. At least some will need to go to state governments to help them address their looming hospital funding gap, as the price for their support of the change. This would leave a little – but not much – to reduce the Commonwealth’s budget deficit, or to pay for other tax cuts that promote economic growth.

(emphasis added).

Is that enough to sell the package? I can’t imagine the states going along with a deal like this for less than 20 per cent of the total extra revenue, which implies the Feds are left with 20 per cent, somewhere between $3.5 and $5.5 billion. From a political viewpoint, it’s hard to see this being worth the effort for the Turnbull government, especially with no guarantee of success.

As a comparison, the FBT concession for motor vehicles, reinstated by Tony Abbott costs the budget around $1.5 billion. Exemptions for non-profits, which have been comprehensively rorted, cost at least as much. Add in a few ‘rats and mice” concessions, and the Federal government would have as much as it could get, in net terms, from the Grattan package (Getting rid of the non-profit concession would probably require some compensating expenditure, but the same is true of the health and education concessions under the GST.)

That’s before we get to the elephants: superannuation concessions (also supported by the Grattan report), corporate tax avoidance, land tax and higher income taxes for (say) the top 5 per cent of income earners (reflecting elite opinion, the Grattan report suggests cutting these rates). All of these are hard, but not obviously harder than the GST.

So, why is GST reform at the top of the government’s list? The answer is simple enough. The advocates of reform haven’t had a new idea, on taxation or anything else, in 30 years. They didn’t get the GST out of Keating’s Tax Summit in 1984 and they didn’t get the version they wanted from Howard and Costello in 2000. So, the same old idea keeps on coming up.

104 thoughts on “Increasing GST: not worth the effort. How about inheritance taxes?

  1. You write, ‘As long as you accept the standard framing of the tax reform debate, in terms of the need to shift from direct to indirect taxation, it is reasonably convincing.’

    I feel as if I’m missing something here. Obviously if you accept it as an assumption that we need to shift from direct to indirect taxation, you can arrive without much delay at the conclusion that we need to increase indirect taxes like the GST. It’s not hard to argue in a circle. It must be tempting for anybody who wants a particular conclusion to suggest adopting it as an assumption, but why should anybody else play along? What you wrote seems to me about like saying, ‘If you accept that they’re not cheating, they seem reasonably honest.’

  2. I think death duties are worth reintroducing. They capture small though significant revenues from the very rich in the US and the UK. They facilitate the Rawlsian conviction that aggressively taxing the rich while they are alive has big inefficiency costs so that redistributions should be constructed so equality at birth is promoted. But the real issue of tax reform involves environmental taxes (carbon and congestion). Congestion taxes would give at least $10b in the major cities if the DWLs are internalised and reasonable carbon taxes (plus savings from the ill-conceived emissions subsidy schemes) would give far more than that.

    Fiddling with the direct and indirect tax mix and making compensations is as you suggest, small potatoes.

  3. I can’t deny I am in favour of an inheritance tax. [1] My reasons are:

    1) It is a logical taxation response in the sense that the empirical data on the growth of wealth concentration is incompatible with the minimum wealth condition in all non-macro G.E. models I have come accross including my own. The role of the minimum wealth condition is to ensure, within the theoretical model, that the notion of ‘freedom of choice’ is not empty in an otherwise classless (egalitarian) society.
    2) In contrast to a land tax, it includes physical as well as financial assets. (A good thing because it removes radical shifts in relative asset prices due to tax policy. Radical shifts in relative asset prices are undesirable in so far as they may lead to discontinuities, the consequences of which are difficult to foresee.)
    3) The death rate can be taken as independent of government policy (not everywhere in ‘the global economy’ – eg Syria at present – but surely in contemporary Australia) and therefore the revenue has a non-political element, which can be calculated by actuarial means (baseline stability of revenue idea.)
    4) On the practical side, as mentioned in JQ’s post, an inheritance tax is not a radically new idea in Australia. This is important for cultural common knowledge.
    5) Furthermore, since ‘global competitiveness’ – in the sense of international alignment of taxation rules – is a recurring discussion point in Australia, it is noted there are moves in several countries to look at inheritance tax to counteract wealth concentration. Among the more radical propositions is one put forward by an Emeritus Prof of Economics, Uni Freiburg, Germany, Guy Kirsch. Prof Kirsch proposes (for discussion purposes) to have inheritance tax replace income tax. Furthermore, Kirsch proposed 100% inheritance tax to be collected in a fund and then distributed equitably (numerically!) among the new generation. (I interpret ‘for discussion purposes’ to mean he goes to the extremes to outline the negotiation space.)
    6) Further on here and now practical matters, some Australian Premiers, particularly the one in NSW, have become used to substantial revenue inflows from stamp duties during the real estate boom (eg in Sydney). Introducing an inheritance tax would cushion the decline of revenue from stamp duties as the market conditions change. (Asking Premiers now to increase stamp duty is a bit like introducing a mining super profit tax after the mining boom.)

    It is one thing to say yes to inheritance tax on the ground of it going in the right direction for specified reasons, it is another to go into details as to the tax levied under various circumstances. One needs a lot of empirical data, wide consultations, and computing facilities, all of which I don’t have. But one more step can be taken, I believe, namely saying something about the structure of such a tax. Some elements:

    a) it should be progressive (within generation equity considerations)
    b) it should be in the national interest (eg farmers, small and medium size local businesses should not have to be sold off to pay the tax).
    c) it should not result in total disinheritance of children and close relatives (intergenerational equity considerations and motivation).
    d) no exemptions for religious or other so-called tax exempt institutions.

    [1] On a recent thread I convinced even Ikonoclast of the relative merit of such a tax over land taxes and reverse mortages.

  4. @J-D

    Even given the standard assumptions, most of the presentations of the case for a GST that I have seen have been thoroughly shoddy. At least with Grattan, if you accept the premises, the argument goes through.

  5. The GST is now 20% in the UK (“VAT”) and 27% in Hungary. It is 25% in several European states.

    Meanwhile foreign transactions are tax free. Go figure????

    Just spread the GST to include foreign transactions.

    Problem solved.

  6. Since the thread includes the ‘new tax ideas’, I venture to propose a revenue tax on multinational corporations. Furthermore, I suggest it is ‘efficient’ in the sense that I know it is extremely costly to check on income earned for any corporation but particularly for multinationals. Revenue, on the other hand, is something that can be monitored via physical and electronic cash registers. (It works for a well known shopping mall owning corporation.)

  7. @Ernestine Gross

    Revenue, on the other hand, is something that can be monitored via physical and electronic cash registers. (It works for a well known shopping mall owning corporation.)

    Exactly right. All AUD foreign exchange is recorded to the last cent by known agents.

  8. @Ivor

    Foreign exchange transactions data and revenue data are not the same thing. I am talking about revenue in Australia. Only internet purchases could be directly extracted from F.E. data.

  9. inheritance taxes, which raised a fair bit of money before being scrapped in the late 20th century

    beginning with the conservative Bjelke-Petersen government and followed like dominos by all the other state governments. The conservative Menzies government also abolished federal land tax in the 1950s.

    Conservative governments are all-too-willing to abolish economically efficient taxes (e.g. land tax, inheritance tax, other forms of economic rent taxes) that are concentrated on the well-off and also all-too-willing to increase not so economically efficient taxes (e.g. GST) that are not concentrated on the well-off in the slightest.

    The astounding thing is that so many not so well off people vote for conservative governments.

  10. @hc

    I think death duties are worth reintroducing.

    Of course they are. But no conservative government is ever going to and if any other sort of government reintroduces death duties then the next conservative government will abolish them again.

  11. @Ivor

    McDonald’s is a multinational company. The fact that it has an incorporated subsidiary in Australia does not change this.

    Suppose resident X in Australia buys something from McDonalds. It costs, say $5.–

    $5 is revenue. I am saying a revenue tax is levied on the $5. There is no corresponding transaction recorded in the foreign exchange data set. Therefore your argument is wrong. Your argument applies only to internet transactions on purchases from outside Australia (imports). Your argument applies to GST but not to a revenue tax.

  12. Meanwhile,

    “The historic Trans Pacific Partnership Agreement (TPP) … was formally signed today,
    (04/02/2016), in New Zealand by the Minister for Trade and Investment Andrew Robb.” – Govt press release.

    I wonder why Robb felt the need to sneak off and sign it in New Zealand?

    Historically, this is the day when the Corporations begin to take control of the 12 signing countries.

    “Each TPP country will now follow its own domestic treaty making process before the agreement can enter into force. In Australia this will include a Joint Standing Committee on Treaties (JSCOT) inquiry and the consideration by the parliament of any implementing legislation or amendments.”

    How long until the corporations tell us we can’t have the PBS, all hospitals have to privatised and welfare delivery most be outsourced? How long until our state and local governments face billion dollar law suits for making laws or by-laws for the citizens and the environment instead of for the transnational corporations?

  13. @Ernestine Gross

    Granted, but if the $5 stays in Australia there is no basis for imposing any tax that is not placed on domestic companies.

    If the $5 leaves Australia it can be taxed – irrespective of the nationality of the company and as it leaves it is all recorded – except for cash in suitcases.

  14. @Ivor

    Wrong again. There is no ‘revenue tax’ on companies at present. Tax is levied on ‘income’. While ‘income’ is effectively revenue for wage earners who have no legally allowable tax deductions, this is not the case for companies.

    May I suggest you download at least one annual report of a company listed on the Australian Stock Exchange (ASX) to get an idea as to what we are talking about. Furthermore, I suggest you look up Michael West’s articles on the topic of multinational corporations from the smh web-site. West’s articles may not make sense unless you have looked at at least one set of financial reports of a listed company.

    Also, please check your information on VAT rates for various countries. I don’t know of one EU country which has a uniform VAT rate for all transactions.

  15. @Ernestine Gross

    I certainly prefer an inheritance tax to a land tax because I won’t be leaving any inheritance to be taxed – other than the land that my old ‘best to wreck and rebuild’ house stands on.

    And I agree with your limitation re not having to sell up small/family businesses to pay the tax, but is there any size limit on that ? Would Gina Rinehart be exempt under that provision – or Packer or Clive Palmer or … Or would they be required to sell the family business ?

    How much annual revenue would an inheritance tax be expected to bring in ? I presume there would be some kind of threshold – eg the first $1 million is exempt (that being just an average sort of house price these days). So how many “well to do” Aussies would die each year and how much would we get ? I ask because I always understood an inheritance tax to be an anti wealth accumulation tax rather than a regular, consistent earner.

  16. Why do we have endless debates on this site about taxes? Yet, we have no real debates, that I can recall, about the ownership of production and the distribution of rewards from production. It’s not a debate of course when I harp on this point and everyone else ignores it. Well, that is fine. But if you don’t frame the question properly you will never get the right answer. Framing our economic and social problems as a tax debate and a welfare redistribution debate misses the fundamental issues of our political economy. You are all going in circles. Don’t you get tired of it? I certainly do.

    Of course, I am free to leave a debate which seems to me to be going round in circles.

    Thus…

  17. @Ernestine Gross

    I do not follow 1) I never said there was a revenue tax. 2) I never said there was a uniform VAT tax anywhere.

    Who or what are you arguing against?

    Do you oppose taxing purchases of foreign currency?

    Do you think Australian businesses should be tax on gross revenue?

  18. @GrueBleen

    “And I agree with your limitation re not having to sell up small/family businesses to pay the tax, but is there any size limit on that ? Would Gina Rinehart be exempt under that provision – or Packer or Clive Palmer or … Or would they be required to sell the family business ?”

    As I have indicated in my initial post, there are good reasons why I can’t and why I shouldn’t be expected to answer questions on details of an inheritance tax. As for the three individuals you have identified, they are either the sole or dominant shareholders in ‘large’ corporations. On the face of it, including publicly available information, they could be ruled out as being exempt. (Beneficiaries of large parcels of wealth have different means to pay for inheritance tax than those of small enterprises. They can ‘liquidate’ (sell) some of their assets or borrow against the assets or a combination of both. Moreover, the ‘large’ enterprise does not need to be sold necessarily, if ever.) It gets a little more difficult to form an opinion if one considers a high wealth estate with 12 or more children and, name a big number, of grandchildren. These are questions where the norm on what is fair in a society becomes relevant, IMHO. Of course, the norm can be influenced by public discourse involving many people.

  19. @GrueBleen

    “How much annual revenue would an inheritance tax be expected to bring in ? I presume there would be some kind of threshold – eg the first $1 million is exempt (that being just an average sort of house price these days). So how many “well to do” Aussies would die each year and how much would we get ? I ask because I always understood an inheritance tax to be an anti wealth accumulation tax rather than a regular, consistent earner.”

    Well, according to Prof Kirsch’s limiting case, revenue (to be placed in a fund and then equitably distributed to the ‘young’) would be 100%.

    I can’t see why the calculated ‘average’ (or median) price of a house in metropolitan areas of Australia is a relevant threshold variable. (I do know that this variable is considered in discussions about a land tax – a kind of lazy option for accountants who have access to land value data to calculate an estimated ‘earner’!)

    I can’t follow your last sentence. Wealth concentration (or degrees of inequality) and the time profile of such is concerned with individuals within a society with a government that needs revenue to meet socially desirable public expenditure. So, one has to go down to micro socio-economic data in such a system and not ‘anti-something’ per se reasoning.

  20. @GrueBleen

    I certainly prefer an inheritance tax to a land tax because ..of.. my old ‘best to wreck and rebuild’ house.

    This is why a general land tax has very little chance of being reinstated in Australia. There are too many people with skin in the game (however small) like GrueBleen. If land tax like the old federal land tax was reinstated then every petty landowner in Australia would say “why should I have to pay this land tax when all those lazy sods who never got off their arses and bought land get away scott-free?”

    The fact is that most of those petty landowners are getting an economic rent that non-land owners simply do not receive and land tax is simply an attempt to return to the community some of the value of that economic rent that is generated by the community, not the land owners.

    It would be more accurate if the economic rent itself was calculated and taxed but that’s certainly more complicated than land tax.

    There is an enormous inequality in land wealth in Australia, far more than the inequality in ordinary taxable incomes. So taxing according to land wealth would be much more progressive than according to income taxation. But this is part of the reason it won’t happen: the super-rich landowners with their political influence shift the political motivation from taxes that affect them the most (land taxes) to taxes that affect them the relative least (income taxes and GST).

  21. @Ikonoclast

    Taxes are the only means citizens can reinstate some measure of social justice in the middle of the ravages of capitalism.

    Capitalisats oppose taxes because it reduces the gains from their exploitation.

    It is class struggle created by

    the ownership of production and the distribution of rewards from production.

  22. A bi product of a property based wealth/inheritance tax is that it would promote more regional population disbursement, not a bad thing at all.

    1. The upper tax bracket must return to halfway to where it was before Howard brought it down.

    2. We need a global flat rate goods and services import levy. Yes it pushes some prices up a margin but take a long hard look at the way people spend their money, we buy a huge amount of imported junk that we do not need, and it all ends up inflating land fills. The net result of this levy is an adjustment to the profitability of locally produced goods and an improvement in employment levels. The levy can be automatically linked to the unemployment level and the fiscal balance so where unemployment increases imported goods become marginally more expensive giving local labour a marginal competitive advantage and the government automatically has funds to stimulate local production quickly. Such a mechanism provides the logical economy balancing device to complement the reserve bank cash rate mechanism which on its own does not have sufficient power to achieve a stable economy.

    The swings and roundabouts that cripple business are not the 5 percents, they are the 30 percent changes. My business is working strongly despite operating with a currency that has plummeted from $1.10 to the US$ down to as low as 67 cents. Resources are in trouble not because of a 5 percent levy but because of a 50% drop in average price over a relatively short period. Would a 5 percent import levy equate for the average person to a 5 percent increase in the GST? No it would not as a levy does not affect locally produced goods and services other than by the very small margin that imported goods affects those products.

    You want some different thinking? There it is

  23. @Chris O’Neill

    Land tax is an old, old furphy.

    It is not the political power of the rich land-owners that are blocking land tax.

    It is best to tax land when it transfers, or the income from land as a regular stream.

  24. @Ivor

    Capitalisats oppose taxes because it reduces the gains from their exploitation.

    Everyone opposes taxes because it reduces their gains (regardless of type) that are taxed.

    But what we have now is a society that taxes different types of gains differently for no other reason than that they are of different type.

    If that type happens to be economic rent from PPOR land ownership (regardless of how large) then the tax rate on that type of gain is zero.

  25. @BilB

    Yes an import levy is needed.

    Unfortunately all our university economists draw strange diagrams whereby a levy lifts prices above equilibrium creating so-called “deadweight loss”. A tiny little geometric area in their diagrams.

    They then shreik in horror at their so-called “loss” – totally ignoring the savage losses to the Australian population due to imports of G&S from oppressed overseas workers.

    The entire Liberal Party and right-wing ALP are all glued to this mindset, as are some right-wing Greens.

  26. @Ivor

    Thanks for the bare assertions Ivor.

    Useless as usual.

    (The one about being “best to tax land when it transfers” is especially silly.)

  27. @Chris O’Neill

    Workers do not oppose taxes because this provides free access to schools, hospitals, roads, emergency services, recreation grounds and etc.

    It seems sensible to tax different types of gains differently.

    I assumne that your land tax is different to taxing economic rent from land. Taxing economic rents is desirable. The tax rate on economic rent should never be zero.

  28. @Ivor

    Workers do not oppose taxes because..

    Sorry Ivor, workers oppose taxes on land that they own. I suppose you’ve never heard of workers that do negative gearing either? You should get out more.

    It seems sensible to tax different types of gains differently.

    That’s very likely true but what justification is there for taxing economic rent at a (much) lower rate than taxing labour?

    I assumne that your land tax is different to taxing economic rent from land.

    That’s an interesting issue and one that doesn’t seem to attract anywhere near as much attention as it should. The fundamentally best tax is tax on economic rent which Australian land has achieved in spades. But I can tell you now that any such tax would be opposed tooth-and-nail in Australia by the rent-seekers who own such land. (Just think of the mining tax.)

    I think economic rent tax on land should be explored much more than it has been. There’s only a few people who canvas it e.g. http://blog.lvrg.org.au . So land tax is a fallback position from economic rent tax. In a sense land tax is a tax on previous economic rent but that’s like making the current owner pay tax that previous owners should have paid but didn’t. So it’s far from perfect. But I’m saying that general land tax is never going to happen again anyway and I’ve pointed out the reasons for that.

    Maybe there is some hope for economic rent tax on land one day, but it’s a long, long way off at the very least.

    Until then, workers will pay much more tax on their work than landowners pay on their economic rent.

  29. @Ivor

    Taxing land when it transfers is normal

    Oh dear.

    Just because something is normal (taxing land when it transfers) does not in any way shape or form mean that it is best (as you claimed “It is best to tax land when it transfers”).

  30. Ivor,

    I think only an economist with no analytical skills at all would see an a import levy causing “deadweight losses” in Australia’s case. The reality is that the converse would be true creating what would have to be called “live weight gains”, a triangle on the other side of the supply demand curve curve intersection, as this is entirely what is intended to happen. The other feature of a universal levy is that everyone is disadvantaged equally, so competitive losses are against imported finished goods and services. Exactly what is intended.

  31. I would like a carbon price please.

    I realize I could also ask for a significant amount of carbon sequested inside ponies and be just as likely to receive it from the current government.

  32. @Chris O’Neill

    But there is no point taxing land when it is not transferring because you are already taxing the income that comes from the land.

    Taxing land and taxing income from land is double taxation. So taxing land transfers is the only sensible option.

  33. @BilB

    I do not know what “Live weight gains” are.

    I do not know what a “supply demand curve curve” is.

    I do not know how you get Harberger’s triangle “on the other side”.

    I do not know how Australia’s case is different.

    I think we need tariffs and must accept the deadweight loss as there are other social benefits.

  34. @Ikonoclast

    I don’t know why you think we can have a “debate” on matters which we don’t even have ‘in principle’ determinations for, but if you want to pursue this topic – not perhaps as a “debate” but as a rational investigation – shouldn’t it go to the Sandpit ?

    Are you interested in pursuing it there ?

  35. Simple logic, Ivor. If tax drag can create a “dead zone”, a grant would create an opposite “live zone”. Frankly the notion of a “dead zone” or its opposite is a doubtful notion which seems to me to be a false notion arranged to argue for libertarian type zero government. Any tax or levy is simply another cost as is profit, and adjusts the supply and demand curves appropriately. In the real world distributors routinely mark products up 100% to 1000%, where does 5% figure into that degree of corporate greed.

    Australia’s case is a country where the standard of living is inflated by mineral wealth, and productive effort of the broad population is steadily directed away from manufacture of goods towards supply of services due to the policies of open competition with low labour cost nations. This is blatantly obvious and should not require explanation. We are living as on a really large Nauru during their good times before the resource ran out.

    Australian fiscal buoyancy has become dependent on resources royalties just as oil nations are dependent on their oil sales royalties and are now suffering similarly.

    http://www.businessinsider.com.au/chart-labour-costs-in-australia-compared-to-other-countries-2015-6

    The danger we face is that ideologues are attempting to use their extreme economic short sightedness and miserable fiscal management to restructure taxation and usher in taxation policies that are to the detriment of the population as a whole.

    Off topic: the hidden gearbox (illustrated on the linked page) in the supposed doping scandal is the bike motor I referred to in an earlier thread, and its operation is not silent. I would not be possible to use it at power without others hearing its motor and gears working.

  36. @Chris O’Neill

    Hmmm, well I’m not so sure about all that “having skin in the game” thing, Chris. Let me just say that my hair, what I have left of it, is grey, and I vote. In short, resurrect some ‘unimproved value’ land tax as much as you like, we grey power folk who live mostly off our pensions will do our mass voting best to ensure that it doesn’t apply to us.

    And why should it ? I pay rates – the current version of land tax – indeed I paid $1340 (up from $1230 the previous year or roughly a 9% increase – what is inflation at present ?) just a day ago for my year’s rates – and that includes a $213 pensioner discount. So what “rent” is it exactly that you think I’m getting ?

    Besides, when my partner and I bought our house back in 1983, we paid all of $75,000 for it – that’s house and land just to be accurate. Our council now values our land and property (ie my “best demolished and rebuilt” 3 bedroom 12 square weatherboard built in 1956) at $670,000 – a mere 893% increase in 32 years. So, who does the land valuation on which a land tax would be based, and would it include large, rapid increases in the valuation, and hence in the amount of land tax we “petty landowners” have to pay ? And if so, why wouldn’t we recalcitrant ‘grey power’ types just stage a tax revolt ?

  37. @Ivor

    you are already taxing the income that comes from the land

    You’re making a false assumption Ivor. An awful lot of property value does not generate taxable income, let alone income tax.

    Come back when you can leave out your false assumptions.

    By the way, stamp duty on land transfers is one of the worst existing taxes ever invented. It is sad that there are people who do not understand this.

  38. @Ernestine Gross
    Response to your comment #22

    Indeed you did say, if I may quote you: “It is one thing to say yes to inheritance tax on the ground of it going in the right direction for specified reasons, it is another to go into details as to the tax levied under various circumstances.”, but previously, and subsequently, you went into quite a few details, or so I had interpreted you.

    However, I’m fine if you only want to discuss principles at this stage. So, is there in principle a cutout level for the non-sale of small/family businesses ? You appear to be saying that there is, so I take it that you think that, in principle at least, there would be some equitable way of determining where that cutoff lies. But I raise for consideration the question of whether, if she was required by Australian Tax Law to flog off a significant proportion of her assets (or, more correctly, her executor to do the flogging off), why wouldn’t Gina Rinehart just ‘do a Rupert Murdoch’ and relinquish her Australian citizenship, and residency (as Packer seems increasingly likely to also do), in favour of say Ireland or some other low tax country and Australia gets nothing from her (them) in either income or inheritance tax.

    And she (they) don’t even have to ‘do a Turnbull’ and secrete their assets in some more or less dubious tax haven in order to do it.

  39. @GrueBleen

    Our council now values our land and property at $670,000 – a mere 893% increase in 32 years

    Maybe not so petty. So who do you think should eventually end up getting this economic rent on your property, even if you don’t? And who do you think should get the economic rent on properties far more valuable than yours?

    You said you preferred an inheritance tax and this is one way to tax an approximate value of the economic rent on inherited land. One of the proposals for taxing economic rent on land is to apply it at the time of sale which I think should include the time of inheritance.

    But one of the big problems is that most people don’t even know what economic rent is, so it’s not going to happen in a hurry.

  40. @Chris O’Neill’s comment on the Queensland government abolishing death duties highlights a known problem with ‘beggar-thy-neighbour’ approach to efficient state taxes. That is, abolish state taxes, gain incremental advantage over other states. The current government has stated that state governments need to raise more of their own revenue. One way of enforcing this would be to implement a deemed revenue base for each state in COAG agreements. After the mining royalty debacle in WA, one would expect a reasonable model to be put on the table. Then if a state decides not to implement taxation at a level to maintain services at the Australian standard (mainly because of political pain) it cannot then cry poor to the Federal government to bail it out.

  41. @Chris O’Neill

    It doesn’t work like that.

    Why would you tax property that does not generate taxable income?

    Rates charges are about all that can be expected but even these are based on potential income.

    You can only do this when it is transferred if there is capital gain.

    So the assumption is safe enough.

    Land is adequately taxed through income, rates, when it is not being transferred and by duty and capital gains when it is transferred.

    The only reasonable options are to surcharge land transfers as part of probate or surcharge land transfers to foreigners, as they are now doing in the UK.

  42. @GrueBleen

    $75,000 in 1983 is $228,447.67 in 2015 dollars.

    So, in your case your real gain is only 3.4% pa (compounded). Which is quite good as it is safe and secure.

    Australia’s economic growth has been similar so you have probably just maintained equity in society.

    See: http://archive.is/1E8LS

    I find it hard to support any additional land tax on this given the % fees and duty you paid purchasing the house, maintaining it and what you will have to pay to realise your equity.

    So I cannot see any so-called “economic rent”.

    If anyone tries – you are right – its time for a tax revolt.

    Land tax is revolting.

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