The ACT Council of Social Services called on the ACT Government last week to look at the way it collects revenue. Two suggestions its made were to base motor registration fees upon the value of the car, rather than a flat fee and to base rates upon the improved value of the property not the unimproved property. The Chief Minister, Gary Humphries, said he would consider the proposals. He certainly should consider the equities of revenue collection, but he should not trouble himself to greatly on these two proposals. Both of them have deep flaws.
Already there is a danger in Australia that hitting the so-called rich as gone to far. Already on the revenue side there are a range of measures which hit middle income-earners fairly savagely. PAYE taxpayers on $50,000 to $100,000 are singled out for harsh treatment on the basis that they can afford it. The cop extra superannuation taxes, higher Medicare payments, a proportionately high income tax rate after the GST compensation than they had before, higher child-support payments. And on the expenditure side, they get precious little. Family allowances of various kinds fade out. They get no public-transport concessions. They often have to shell out large sums to stay in the workforce on childcare, cleaning, take-away food, dry-cleaning and other services they no longer have the time to do themselves. The danger is that after a time some of these people will get jack of it. Why bother working 50 hours a week and push yourself into the income bracket ripe for government plucking? An income of $50,000 coupled with up to 50 hours of work can become a fairly marginal proposition.
The income brackets $50,000 to $100,000 have copped it fairly heavily in the past decade. It has always been presumed that they can afford an extra slug. After a while, though, the series of imposts builds up. It has a cumulative effect. The state and local levels of government should avoid also singling out this income group. Sure, the ACT Government should help people on lower incomes, but it should be done on the expenditure side where it is transparent.
There are other defects in ACTCOSS’s plan. If registration is charged on value, people will be encouraged to hold on to older cars. These are more polluting and not as safe as newer cars.
Already business registrations cost about $100 more per year. Also upon purchase, stamp duty is not on a flat fee to cover administrative costs, but levied at 3 per cent of value, so goes up with the value of the car, and a penalty rate of 5 per cent cuts in at $45,000 value and above. Then registration fees go up with increased weight. This discourages heavy cars, which are bad for the environment, but also generally hits more expensive cars. Further various categories of social security recipient get large discounts. In sort, there is already enough discounting for the poor and hitting the rich with car-registration fee.
On the rates front, it costs as much to collect the garbage and provide other services to a hovel as a mansion. Rates should be a service cost, not a social security mechanism. Income tax already provides a large enough wealth-transfer mechanism. A couple of hundred billion quite rightly get transferred to health, education and welfare in a very efficient way. Additional imposts based upon the value of a dwelling will discourage people from improving the city’s housing stock, to the overall detriment of the city, including environmentally valuable improvements like solar-heated water, insulation, landscaping and the like.
If Mr Humphries is keen on looking at bad taxes, he should first look at stamp duty on dwellings which is extremely high but conveniently tied to a large transaction so go disguised. At present, it is a huge impost. Together with legal and real-estate agents’ fees they are a detriment to people moving to more appropriate housing – smaller when children leave home or better located when employment changes.
In general, governments should have more level non-distorting taxes and leave social security questions to the spending side of the Budget.