THIS week we learnt that house prices in the ACT had shot up in the year to the end of March. The median house price in the ACT at the end of March was $195,000 – – an 11.4 per cent increase over the year.
The ACT government must be licking its lips in glee. This is because with every increase in property values it gets a large windfall in increased stamp duty. The growth of stamp duty on house transfers in the past 20 years has been insidious. Governments which put their hands on their hearts and say watch my lips – “no higher taxes” — ignore the way the stamp duty system works. Unlike rates and land tax, there has been no significant adjustment in the progressive scale of stamp duty for 20 years. Now stamp duty is a huge rip-off by government, and falls erratically on the population who happen at to buy and real-estate any given year. The rate of stamp duty is now so high it must be acting as a deterrent to people moving into more suitable accommodation.
With rates and land tax, on the other hand, when property values go up the government strikes a lower rate in the dollar to compensate for that, so that the overall tax take remains about the same. The reason governments do this is because the broad population pays rates every year and if they went up too steeply there would be a voter backlash. However, stamp duty affects only a few people in any given year and so is not as voter sensitive.
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