Treasurers’ addiction to home tax must end

In June The Daily Telegraph called stamp duty for what is was, describing it as “scandalous”, “a penalty for home ownership and a barrier to first-home buyers”.

This was in response to new Property Council analysis showing stamp costs had risen by an eye-watering 749 per cent over the last 20 years.

In 1995 stamp duty on the average family home was just $4685. Today the stamp duty on the same house is a whopping $35,090.

These unfair increases have far out-stripped the growth in house prices over the same period and are light years ahead of CPI. This is a major barrier for people struggling to get into the market, coping with a growing family, moving closer to a new job, or downsizing to something more modest.

Yet when the country’s treasurers met on Friday to discuss national tax reform, they seemed dismissive of these concerns.

The reluctance of our country’s State and Territory treasurers to consider any changes to stamp duty at their meeting last Friday with Federal Treasurer Joe Hockey was disappointing but not surprising.

It was also a wasted opportunity to address another fundamental national economic problem – housing affordability.

Government addiction to this regressive and punitive tax on home ownership is deeply entrenched. After all we have been paying it for 1 years now.

But it is an addiction Australians can no longer afford to support, or pay – literally.

Saving for a deposit is tough enough. Most aspiring homeowners will spend years working hard to save up. But clearing that huge hurdle doesn’t get you through the door. It doesn’t even get you on the doorstep.

A family on an average income looking to buy a median priced house in Sydney putting away $100 a week would take almost seven years to save enough to even pay the stamp duty required.

If they were to add the stamp duty to the mortgage this would almost double the initial cost over the life of the loan.

And what do you get in return? Absolutely nothing other than the world’s most expensive rubber stamp.

There’s no comparable tax on buying any other asset – including a car – that comes close to the rate of stamp duty paid on a home.

If a higher GST is to be on the table – as it should be – taxpayers are entitled to ask what the trade off for this would be. Certainly increasing the GST without any offsetting stamp duty cut would just add to the cost of newly constructed housing.

It is reasonable then to ask why governments should be able to put their hand in your pocket for an average $30,000 tax hit every single time you want to buy or need to move?

And it is only going to get worse. Stamp duty is a tax that has already spiralled out of control. The last time stamp duty rates were reviewed was before today’s aspiring home buyers were even born. It’s simply been left to run rampant.

But stamp duty isn’t just bad for home buyers, it is a drag on the broader national economy too.

As Mr Hockey, Treasury and every tax analysis ever done has conceded, stamp duty is not a good economic tax. Big taxes on transactions means less transactions, and that has an impact right across the economy, particularly in retail, construction and on labour mobility.

It literally holds back growth and the creation of new jobs.

Australians can’t afford stamp duty and neither can the country. It is time our treasurers kicked the habit and stopped taxing away housing affordability.

 

Published in The Daily Telegraph: http://www.dailytelegraph.com.au/news/opinion/its-time-to-stamp-out-stamp-duty-pain/story-fni0cwl5-1227495376980?sv=782307f1c85816b1855984d078ea4487