21 March 2024

Adopt ACT-style land taxes, make $27 billion, suggests economic think tank

| Claire Fenwicke
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Aerial view of Canberra

Prosper Australia has suggested that $27 billion in revenue could be raised if the states adopted the ACT’s approach to land tax. Photo: City Renewal Authority / Facebook.

An independent policy institute has called on the Commonwealth to change the “tax mix” and consider incentivising states to adopt a land tax approach similar to the ACT’s.

Prosper Australia’s report argues that levelling state taxes on land up to the Territory’s benchmark could raise as much as $27 billion more in revenue each year without reducing investment or growth.

It comes off the back of changes to the Stage 3 tax cuts, which Prosper Australia research and policy director Dr Tim Helm said wasn’t “proper” tax reform.

“The Stage 3 tax cuts debate was all about fairness and who wins and loses from different income tax proposals,” he said.

“[But] proper tax reform is about replacing bad taxes with good ones.”

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The pitch is based around shifting taxes from income and onto land to rethink the ‘tax mix’ and increase workforce participation, economic activity and wellbeing.

The report stated low and middle-income earners on welfare payments, combined with income tax, face effective marginal tax rates (EMTRs) of up to 75-80 per cent on extra income.

Many welfare payments – such as the age pension, parenting payment, JobSeeker, Youth Allowance, disability support pension and carer payments – are on part-payments due to means testing, which reduces payments the more money someone earns.

Prosper Australia argued high EMTRs discouraged people from taking on work or increasing their hours.

“Withdrawing [or reducing] welfare payments as incomes rise is economically identical to taxing income … High EMTRs discourage people from taking on work or increasing hours,” the report noted.

“This divorces pay from effort, discourages work, and increases labour costs, reducing GDP. High EMTRs can also create ‘poverty traps’ at low incomes.”

It pointed specifically to childcare costs on top of income tax and welfare withdrawal as producing “disincentives twice as large” as those imposed by the top income tax rate.

“Improving work incentives by lowering welfare taper rates necessarily requires either higher spending as eligibility is expanded to higher incomes, or lower top payment rates if the cost is to be held constant,” the report noted.

“Flattening any part of a rate scale either reduces revenue or requires higher rates elsewhere. It is an inherent problem with a system in which we fund adequate incomes for all by taxing the incomes of people who work and earn more.

“To escape this, we need revenue from elsewhere – ie, from changing the tax mix.”

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Prosper Australia argued the ACT was the benchmark when looking at using land tax.

The ACT prices rezoning via its Lease Variation Charge (LVC), which captures 75 per cent of the windfall gains landowners would otherwise pocket when receiving permission to redevelop at a higher density. The Territory also captures 100 per cent of the gains from rezoning rural land for greenfield development.

The Territory also raises more revenue from regular land taxes than other states and territories.

Dr Helm said the potential $27 billion that other jurisdictions could raise by adopting the ACT’s approach could help pay for welfare system reform and reduce work disincentives created by means-testing.

“Our research found that if other states taxed land like the ACT, we’d have enough revenue to cut welfare taper rates in half, giving one million people an effective tax cut of 20-30 cents in the dollar, and putting cash in the pocket of two million more,” he said.

data table

Potential additional revenue as a percentage of GSP from ACT-style taxation of land. Photo: Prosper Australia.

The report noted this could double the net-of-tax return for most welfare recipients, as they could work more hours without being penalised.

It argued low-to-middle income workers with an income range up to $70,000 could have their wages boosted by $4000 to $7000 per annum.

Dr Helm said the Commonwealth could incentivise states to take up the tax reform.

“Adjusting Commonwealth-state grants and providing incentives for states to tax land and rezoning windfalls would be an attractive way for the Commonwealth to drive tax reform where it’s most valuable, which is how well states tax our most efficient base,” he said.

The report concluded: “Even modest changes to land taxation could pay for substantial reform.”

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How about, instead of coming up with new ways to tax wage slaves and rate payers, they look at ensuring large corporations pay their share each and every year.

devils_advocate9:00 am 01 Apr 24

Leaving aside the state/ territory versus federal jurisdiction, I will point out that going after multinationals to pay their fair share is difficult. You need to come up with enforcement strategies, intelligence strategies, recruit and train talented people and embed those capabilities in the agency over a period of time. It may also require tax policy changes which may or may not be effective if they are papering over more fundamental incentive or flight of capital problems.

Much easier to just slug the punters with property taxes for the audacity of wanting to own something.

devils_advocate1:20 pm 27 Mar 24

Yep let’s increase land taxes, stamp duties, rates and all the other costs associated with owning rental properties, as well as retrospectively applying energy efficiency and other requirements to existing dwellings. While we’re at it remove any and all cost benefit associated with apartments, despite their smaller resource and infrastructure footprint

At the same time let’s crush the majority of urban infill projects with punitive lease variation charges, red tape and uneccessary delays and holding costs

And then extract the maximum possible revenue from drip-feeding new land releases to the market

OMG!!! The sky is falling … run for the hills!

Did you actually read the article, or just see the headline and immediately start typing your “poor disadvantaged developer and landowner” response?

Perhaps you should first consume the logic of the land tax proposal and then present an argument against it, rather than a brain dump of everything, that in your mind, impacts those “poor disadvantaged developers and landowners”.

devils_advocate6:07 am 28 Mar 24

@JustSaying are you responding to the correct post? Where did I mention developers and why would I present an argument against land tax, my post (among other things) was saying to increase it.

Maybe try reading what’s been written before commencing the screeching?

“the majority of urban infill projects” – sounds a lot like a developer to me … maybe read your own post

devils_advocate10:47 am 28 Mar 24

@JustSaying yes I just read my post, quoted below for ease of reference-

My post: “Yep let’s increase land taxes, stamp duties, rates…”

Your post: “Perhaps you should first consume the logic of the land tax proposal and then present an argument against it.”

lol what? Idk who you’re arguing with but it’s not me

Given your bleating over land taxes and other imposts on landlords, etc. here’s me thinking you were being sarcastic.

Fair enough. I’ll remember that in future when you disagree with a particular tax you actually agree with it.

devils_advocate12:26 pm 28 Mar 24

…Or perhaps remember that simply pointing out the effect and economic incidence of a tax doesn’t amount to a view on whether it’s a good or bad thing.

There’s plenty of bleating that goes on about greedy landlord this and windfall gain to developers that, but it’s not from me.

HiddenDragon8:00 pm 26 Mar 24

There was a federal land tax from shortly before the First World War until the 1950s.

People who think land tax is a great idea would probably say something along the lines of “typical of Menzies to abolish such a tax” – but that does not explain why none of the subsequent Labor governments, in spite of pursuing many highly contested reforms, reintroduced such a tax or, as far as I am aware, made any serious efforts in that regard.

The answer to that question might be similar to the reasons why no other jurisdiction has followed the example of the ACT, including the Labor governments in WA and Victoria which have commanding positions in their respective parliaments and could probably get away with just about anything.

The simple truth is that land tax is something which works much better in theory than it does in practice – mid-term evaluations of what is being done here struggled to find appreciable benefits, even with sympathetic assumptions and modelling. Housing in Canberra has not become miraculously affordable, swathes of properties have not been freed up by people being incentivised/enabled to move to something more “appropriate” and in spite of big increases in general rates in the ACT, falls in stamp duty rates in the ACT compared to NSW have been marginal at best.

The people who are obsessively pushing this idea might do better to explore why it is that state governments, in earlier decades, used to be able to provide services at least as effective as they now provide without a land tax on owner-occupied dwellings and with stamp duties on the purchase of those dwellings which were much lower in relative terms than they are now – there are two sides to a ledger (an important point which many public policy economists now overlook).

“The answer to that question might be similar to the reasons why no other jurisdiction has followed the example of the ACT”

No, the answer to that question is most likely far simpler and in line with the reasons why other sensible taxation changes haven’t been made as well.

That being because there’s far too much self interest and money involved from the electorate to allow reasonable changes to be made. The incessant squealing you hear from well off property owners, investors and other rent seekers in the industry every time a change is proposed is the clear political driver.

And to the contrary, the mid term assessments in the ACT did show appreciable benefits from the reforms but the clear limitation is the fact that the change has only been made in the ACT. It’s impossible to significantly improve things like housing mobility when other states are still heavily relying on Stamp Duty.

As for your comment on how government’s in previous decades provided services whilst having lower amounts of revenue, the answer is they didn’t. Service levels and spending was far lower and the make-up of the population and demographics was also completely different.

Incidental Tourist3:48 pm 26 Mar 24

ACT land tax is the core of the cost of living pressure. This is “per head” flat tax. No matter how much you earn, if you are part time or full time, whether you work or not, whether you spend or not, if you are ill or fit, whether you have a debt or not, even regardless if you own house or rent it – you have to pay every quarter because you have a roof over your head. It encourages Government wasteful spending. No matter how bad their performance is, no matter how destructive are policies, their income stream is only increasing.

If “land tax is the core of the cost of living pressure“ then obviously no-one else in the rest of the country is under cost of living pressure.

Your comment may be confused and ill-informed, but more likely just riddled with wilful bias.

Land tax is based on the value of property owned and no one is forcing you to own that property. Don’t own, don’t pay.

As for your claims around encouraging wasteful spending, it’s far more likely to create more efficient spending over time because of the more steady revenue base for government.

Relying on stamp duty on the other hand is pro-cyclical, encouraging wasteful spending by governments during booms due to windfall revenue. Then they have to cut back hard during downturns. Both of those things reduce economic performance over the long term.

This would just make the housing crisis even worse for tenants, who will have to pay more rent to cover the land tax for landords. ACT has been building apartments at fast pace, but rents are exorbitant because of the higher taxes on owners. Rent needs to cover the high cost of rates, land tax, repairs and loans, so whilst there may be more funds for the government, tenants will need to fund it via their rent.

Psycho makes the usual self-serving claims.

Canberra’s rental market, like other aspects, is a function of its particular socio-economic profile. The market of buyers as well as sellers determines price and availability within a given tax regime and economic wealth.

More efficient and equitable taxation of resources also benefits mobility of labour as a further economic contribution. Canberra is fortunate to be ahead of other States by a gradual transition where others must now struggle to change more quickly — worse for their citizens.

Even as a rational person of any political persuasion must give credit to John Howard for gun control laws, so land taxes in lieu of stamp duty must be accepted as a singular achievement of the leftish government of Canberra.

Self-servng? How? It doesn’t help me at all.

This is about simple mathematics. If costs are higher, landlords have to put up the rent up to cover them or get out of the market. Many have done that which has reduced supply and increased demand.

Yes buyers ability to pay is relevant, which is why our homeless numbers have grown so much. Many people cannot afford the rent. Higher taxes give more ongoing funds to the government, but they’re not spending them on health, housing or anything else that helps those in need.

I’m yet to see how this method is more equitable. It’s awfully tough on those with low fixed incomes, as not only did the ACT government introduce land tax, but they also massively increased rates so owners living in their properties (not there for capital gain or rent income) have to find more money to pay the government, but without any increased income. Too many find themselves forced to sell or go hungry.

It’s certainly more efficient for government, but unless the government uses this money well, it’s not helpful for ACT residents.

Self-serving in that it looks for increased profit through reduced taxes. It is interesting that you note the market impact yet ignore it.

Landlords cannot simply raise prices at will to cover taxes because ultimately the market cannot pay, as you recognise yourself. If the investment is unprofitable, they exit. A peculiar effect of that change in supply is that house prices fall. Also without the stamp duty burden on transactions, buyers of homes and of potential rentals can now afford to buy/rent out, so rents remain stable or even fall. Housing as an asset class for capital gain also loses some lustre. That might aid in getting rid of the ludicrous CGT discount level.

The “government using the money well” is a truism, completely irrelevant to tax equity and efficiency.

Your argument is not based in facts but totally incorrect assumptions, as before. Whilst for you beliefs not facts may dominate your thinking, I prefer to work with truth.

1) self-serving means it must serve my interests, but it does not. I have no increased profit through reduced taxes.

2) there is still stamp duty on purchases in Canberra

3) your arguments are based on theory, not fact.

If you prefer to work with truth, why do you keep putting forth discredited arguments that Landlords can simply increase rents arbitrarily?

Particularly when you even freely admit the market impacts and forces in your own comments that mean it’s not possible.

Is this some sort of backwards “truth” that you learn when you become a landlord and are only interested in your own back pocket?

Psycho, please read a little more closely.

1. I said they were self-serving arguments, which they are, seen often here. I did not claim you were a specific beneficiary (nor exclude it). That neutrality does not alter the fact that the arguments are intrinsically self-serving.

2. Wacky do. Who said there was no stamp duty? I said “gradual transition”, and there is, intended to complete around 2032. It is other States who need to catch up.

3. That’s funny. One moment you want to tax common resources efficiently, next moment you don’t and call it “a theory” like some sort of creationist on the theory of evolution by natural selection. Care to explain your irrationale?

Meanwhile, to quote Schwerhoff et al, “It is a well-known result in economics that land value taxation is efficient since it does not distort the supply of the tax base.” The authors go on to cite empirical evidence from France and the USA, noting adjustment effects for wealth stratum. Other papers are easily found, including specific studies of ACT outcomes in about the decade since 2012. The ACT did not invent taxation of land value.

devils_advocate7:51 am 28 Mar 24

“Landlords cannot simply raise prices at will to cover taxes because ultimately the market cannot pay, as you recognise yourself. If the investment is unprofitable, they exit. A peculiar effect of that change in supply is that house prices fall.”

Nope. The demand for housing is relatively inelastic. People need somewhere to live, and there are hard limits on how many additional people can cram into a given house.

Supply is also inelastic in the short run, given lengthy lead times in regulatory approvals and capital constraints. In the longer run the shortage of skilled trades and consultants will also constrain supply.

Lastly, demand though population growth (including deliberate policies to drive that well above normal) is going one way.

And yes, changing the relative mix of owner occupiers versus landlords does have an impact on the supply and demand balance in the rental market.

In summary, increasing the cost base raises the break even point for rational property investment, and in a market such as the ACTs yes, landlords can and will raise rents with impunity.

Also house prices are about to rocket again, just FYI.

Ah of course, landlords can just increase rents with impunity because renters don’t have any other choices and have unlimited funds to pay more.

Which is exactly why landlords are benevolent, generous and charitable in not arbitrarily raising rents right now when they clearly have the ability to.

So charitable in spirit they are, you’ll never hear them complain about their own costs or increasing taxation because they can just arbitrarily cover the increased impost with increased rents. Their only flaw, if any, is being too nice and giving.

devils_advocate10:51 am 28 Mar 24

“Ah of course, landlords can just increase rents with impunity because renters don’t have any other choices and have unlimited funds to pay more.”

Well, perhaps some of them yes. Other renters with less financial means will find themselves out on the street or moving to a lower-cost-of-living area.

After all the whole point of having market power is the ability to charge a higher price for a lower quantity or quality of goods/service.

devils_advocate, in your fantasy world you have market power. Landlords have nominal market power, not real market power. That is, landlords can price in accord with current market conditions including capacity to pay, whereas real market power represents excess value not yet captured by the seller.

The idea you can raise prices with impunity is a ridiculous pretence you use, trying to get taxes reduced to milk the social purse for personal benefit. You are an exemplar of rent-seeking.

devils_advocate1:57 pm 28 Mar 24

1) where is ACT currently sitting in terms of most expensive states to rent?

2) point out where I said I was a landlord.

Reminder, I’m not responsible for your hallucinations.

1) where is ACT currently sitting in terms of most expensive states to rent?

Behind Sydney and similar to a number of other capital cities who apparently don’t have the level of “punitive” taxes that Canberra does.

Almost like there are a number of other factors that have a larger impact on the rental markets in each state.

If landlords actually had the level of market power you claim, they’d already be charging higher prices, investors aren’t charity providers.

But they can’t. Because they don’t.

Seems rather strange that landlords whinge so much when their taxation burden increases. By your logic around their supposed market power, they shouldn’t care.

Note the evasion by subject switch, folks. Suddenly, devils_advocate does not want to claim real pricing power but seeks to divert the subject.

1) A paltry attempt. The question is affordability in the market, not the price which is affected by socio-economic profile of the area of interest. It is plain silly or ignorant to compare an urbanised area like the ACT with whole other States. The ACT ranks in the middle of Capitals for rental affordability, and has hovered around there for a while.
And of course as I noted in opening, that has nothing to do with real pricing power. Both of your argument and diversion fail.

2) Point out where I said you were a landlord.
Land tax and your digressive fantasy on pricing power are under discussion. Your positions on taxation of value are on the record.

Hallucinations? It seems to be all you have left.

devils_advocate3:17 pm 28 Mar 24

As of December 2022, Canberra was the most expensive capital city to rent a house at the median rent of $690

We can get back there! We can raise the direct cost of ownership through rates and land taxes, as well as the capital cost of the assets through stamp duties, developer taxes, excess regulatory burden and restricting new supply.

We may be a small city, but we can reclaim our spot as the most expensive jurisdiction to rent. We’ve got this! Make ACT Great Again!

“As of December 2022, Canberra was the most expensive capital city to rent a house at the median rent of $690”

And despite apparently further increasing the taxation and regulatory burden since then, Canberra’s relative rental position has dropped compared to the other capital cities.

Unlike rent seekers to attempt to cherry pick data and discredit their own argument in the same breath.

devils_advocate9:34 pm 28 Mar 24

“And despite apparently further increasing the taxation and regulatory burden since then, Canberra’s relative rental position has dropped compared to the other capital cities.”


Almost as if there are additional factors that compound the existing drivers of housing affordability. I wonder what additional factors could have driven rental demand in Sydney. I’m sure the geniuses on this site can figure it out.


Almost like I said that exact thing this afternoon.

“Almost like there are a number of other factors that have a larger impact on the rental markets in each state.”

Once again:

“Unlike rent seekers to attempt to cherry pick data and discredit their own argument in the same breath.”

Canberra rents go up = oh its caused by the regulatory and taxation burden.

Sydney rents go up = oh there’s other factors at play.

Property spivs are too funny in their repeated delusions and illogical statements. Lucky I’m not responsible for them.

devils_advocate1:51 pm 29 Mar 24


So the existence of “other factors at play” means we should ignore the factors that are within the control of the local government.

I don’t know what precisely a property spiv is, but certainly they must be more intelligent than the low-income-earning transfer recipients who seethe with jealousy over the economic rents they extract

Bryan Kavanagh3:06 pm 23 Mar 24

An excellently argued paper from Dr Tim Helm, finally addressing fundamental poverty trap issues relating to welfare. Helm’s case is also a beacon of light in a grim economic scenario by suggesting that taxing incomes and purchases more than speculative investment in real estate has clearly come at a great cost to Australia’s productivity. Well worth a read, policymakers!

It would be really good for all Australians if we taxed our mining companies properly, as is done in the northern hemisphere. The minerals are Australian resources and should benefit all of us by being used for health, education etc., as is done in other countries where mining billionaires pay their way a bit more.

You seem to have the clue about taxing resources, psycho. Australian land is as much a common resource as its saleable rocks.

Elle Cehcker6:48 pm 22 Mar 24

More Taxes…good idea geniuses

Don’t have to do a study or independent report to know we are better off doing what Argentina is doing to turn a budget surplus, cut Government Department paper pushers and bureaucracy and save billions

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