Well, I have just received my latest rates notice, and it is almost $1000 more than last year. This is because I am just above the magical “you are a sponging plutocrat” level of of my land apparently being worth more than $450,000.
I would not mind so much if it was being matched by genuine attempts to rein in over-expenditure, and structural reform. But, every couple of weeks, we see hundreds of thousands of dollars of handouts for no measurable outcome to people who have been encouraged by advertisements to ask for it. We see millions expended on measures to “Save the Planet”, which on any objective level will do no such thing. At the most trivial level, we see money that others have worked for lavished on “public art” which the public detests.
Meanwhile, at some point in the future, the ACT government promises that structural reform about stamp duties and so on will materialise. But for today, another $1,000 thanks.
That is the action of a government that has no intention of managing spending, but is glad to take extra revenue when the opportunity arises.
A contrary view (to the Henry/Barr way of thinking), from across the Ditch:
http://www.macrobusiness.com.au/2013/10/getting-development-incentives-right/
The rates assessors have clearly not been distracted from their purpose by Alan Fitzgerald’s memorable zinger about Narrabundah, or by the peacocks or the tyre slasher – more likely they have fond memories of the now relocated truffels.
Queen_of_the_Bun said :
Up until the last few years, it was well known as an undesirable suburb.
Queen_of_the_Bun said :
You find it as offensive as you like. Narrabundah (at least lower Narrabundah) used to be an undesirable place to live. It’s not any more, of course – far from it. But to take offence at history is not very smart.
Queen_of_the_Bun said :
Well!! I live in Calwell and I take offence at your notion that we are so far out that our rates are as cheap as. I have been round Narrabundah for various bits and pieces and wouldn’t buy in the areas I could afford for nix. I don’t really think that, but I do think that no one else seems to have taken offence at Breda’s take on his suburb which makes your post look odd.
I never understand that why living somewhere that is leafy, green and a lovely 20 minutes away from really anywhere that I might need to go like work, is a problem. I lived in Sydney for 10 years, quite a few of those very close to where I work in North Sydney, and quite frankly I hated seeing my office block every time I wanted to catch the train anywhere.
breda said :
Breda, as someone who has rented in Narrabundah on and off since 1996 and has only just managed to buy into the area, I find your depiction of it as an undesirable suburb really offensive.
You should consider how lucky you are to be in such a great suburb, so close to amenities. If your rates are so high, move northside to Kaleen or south to Calwell.
Tetranitrate said :
In this case, I think the progressivity has much to do with the politics of divide and rule, and boiling the frog slowly. It has worked well so far, and by the time it sinks in for the majority, it will be too late.
watto23 said :
1/ So you’re happy for public housing tenants to stay in oversized housing well into their declining years but not homeowners?
2/ Many home owners still have to sell up in retirement and down size simply because they still owe money on homes that they have lived in but this shouldn’t mean that others who have worked hard to pay off their homes in their working lives should be forced to move. (As others have pointed out reverse mortgages are a crap product).
3/ Often older homes do not fetch much more than the land value meaning that these older people are forced into apartments or out into the suburbs, away from services and at a time when they are less likely to be able to drive. I find it ironic that many older persons end up living in places like Weston Creek where the bus service is appalling.
milkman said :
I’ll have to think about that – it might be a situational thing, like one’s stance on important matters such as flipping.
HiddenDragon said :
Even as someone who’s in favor of land taxes/rates being as high as possible at the expense of other taxes, I still can’t grasp why they should be structured as progressive taxes. They’re not actually a tax on an income stream, they’re effectively taking in part of the economic rents or potential economic rents from an asset.
If anything making them progressive actually means it’s not a perfectly efficient tax anymore as it creates tax incentives to subdivide high value land and would more generally favor smaller blocks.
Why should a 5 or 6 bedroom ‘mansion’ on a massive block have a significantly greater tax liability (assuming it more than compensates for the fixed charge) than two three bedroom houses on the same m^3 of land in a similar area?
I know the determination of unimproved land value don’t really work quite like that in practice, but to some extent it has to be the case. There’s not really a good case for rates being progressive at all.
Both sets of my grandparents and my parents all sold and moved to cheaper housing after they retired. They decided to not whinge about it and move to somewhere they can afford to live.
HiddenDragon said :
You’re obviously not a lefty, then.
HiddenDragon said :
But shouldn’t I just get it anyway? I mean, isn’t this massive sense of entitlement worth anything? Sheesh…
I am happy enough to pay progressive rates of tax on my income because it’s money I have actually received – it’s not a figure dreamt up by the ATO as a result of a periodic, cursory guesstimate of my means.
I find it interesting that many of those who are very keen on the shift from stamp duty (which is typically based on an actual market figure) to annual land taxes are also firm believers in the economic wisdom of the flattest possible income tax scales – economic theory, and the evidence quoted in support of it, seems miraculously to conform to the world view and personal circumstances of those advance it.
breda said :
Welcome to progressive taxation. Your means have increased, so the proportion you pay increases.
breda said :
Breda, honestly have you read the links provided and the arguments for this change?
Your whole whinge is that the taxpayer should subsidise asset wealthy people because you think it’s unfair for them to have to move or get a reverse mortgage even when that reverse mortgage would clearly cover the liability comfortably.
Please answer why you think the taxpayer should subsidise these people and why you think their assets should be treated differently?
PS, I’m really emotionally attached to my share holdings. I think you should give me some cash because I don’t feel like selling them to fund my lifestyle.
Seriously, you are saying that because appreciation of land values are enough to cover “tax liability”, that’s the end of the discussion?
You have completely missed the point. Here is X, someone who has worked and saved and finally bought their home. Suddenly, X’s “tax liability” rises. Nothing else has changed, including X’s income. According to you, what X has to do is sell their home to someone who is wealthier and can afford the “tax liability”, or alternatively watch their asset waste away under a reverse mortgage and deferred rates. Nobody knows if or how that will last them to the end of their life.
Brilliant. You will have us all in public housing in no time. But, who will pay for it?
breda said :
What I said was that equity was easily enough to cover tax liabilities for the rest of their lives.
Exactly how long do you intend to live that ~$2000-3000 a year in rates is going to deplete $450,000 worth of equity, plus whatever the house is worth on top (plus however much it increases in price over that period).
Unless you expect to live to 150+, live in a home with the equity of a caravan, and expect taxes to double every year in to infinity, this is absolutely true.
breda said :
Do you know what bankruptcy means? What kind of rate increase is going to put someone in a position where they can’t cover their tax liability with $450k+ in equity?
breda said :
So essentially what you’re saying is that having the value of your land increase hugely is a burden because it increases your tax liability, but that despite being able to cover this tax liability and much more with the massive, unearned, windfall gains you experienced, you shouldn’t have to because reverse mortgages are a bad deal?
Unbelievable.
@ arescarti 42
“It’s not il-informed at all. Good value or not, there is no reason at all why an asset rich, cash poor retiree couldn’t take out a reverse mortgage to pay their tax liabilities for the rest of their lives, and not have to change their standard of living/other expenses one bit.
Any decision to move would be a purely voluntary one.”
———————————————————————————–
Yep, so (a) we all know exactly how long we are going to live; and (b) our equity is enough to keep us going “for the rest of our lives.”
Both of these propositions are false.
I can only assume that this poster is not remotely in the situation of an older person who is trying to work out how to survive while having a decent life, when due to events beyond their control, the suburb has become trendy. Sales are not “voluntary” when the alternative is bankruptcy.
I am not spruiking the need to protect people who are sitting on properties worth millions. But, in Canberra, owing a property with a UCV of $450k hardly puts you in the plutocrat class. Especially when, at the time you bought it. it was because it was considered undesirable, and therefore appropriate for the plebs.
HiddenDragon said :
Spot on.
HiddenDragon said :
Reduced stamp duty in particular will benefit new home buyers. Government charges and taxes in some states make up as much as 40% of the cost of new homes. Developers actually struggle to build new homes that a typical new home buyer can actually afford to buy (hence the dramatic plunge in both FHB activity and new homes built in recent years). Ditching stamp duty would do a lot to improve that.
Innovation said :
Just because someone doesn’t “like to carry debt in any form” does not mean they are forced to sell. If you have both the option to sell your home and cash in, or get a reverse mortgage and continue doing exactly what you’ve been doing, then you have a choice, and are not being forced to do anything.
Innovation said :
Both excellent ideas, bring them on.
breda said :
It’s not il-informed at all. Good value or not, there is no reason at all why an asset rich, cash poor retiree couldn’t take out a reverse mortgage to pay their tax liabilities for the rest of their lives, and not have to change their standard of living/other expenses one bit.
Any decision to move would be a purely voluntary one.