You might think that being a state (or territory) treasurer is a boring job. The federal treasurer gets all the media attention and controls many of the big economic levers, including income and company tax, massive Australia-wide spending and trade and competition policy.
But you would be wrong.
Grattan Institute’s State Orange Book 2018 shows that if state treasurers relied less on taxes that hurt the economy and more on the ones that are the very best they could provide a huge boost to their economies.
The big prize
Almost every tax hurts economic growth, but some hurt more than others.
Our state treasurers know this, yet they continue to make poor choices.
Taxes on transactions, such as stamp duties on real estate purchases, are particularly inefficient.
They make it more expensive to move home to take a new job across town or in a different town, encouraging people to stay put. They make it more expensive to move into bigger or smaller homes, encouraging people to renovate instead.
With the typical stamp duty bill now above A$40,000 in Sydney and Melbourne, this is more than just an idle theory.
ACT is showing the way
The Australian Capital Territory has Australia’s most efficient tax base – every dollar of revenue raised costs the economy just 21.9 cents.
New South Wales has the least efficient – every dollar of revenue raised costs the economy 29.7 cents.
- ^ here (theconversation.com)
- ^ State Orange Book 2018 (grattan.edu.au)
- ^ To make housing more affordable this is what state governments need to do (theconversation.com)
- ^ extraordinarily efficient (grattan.edu.au)
- ^ Grattan Institute Orange Book 2018 (grattan.edu.au)
- ^ Grattan Institute Orange book 2008 (grattan.edu.au)
- ^ follow the lead (grattan.edu.au)
- ^ making housing more affordable (grattan.edu.au)
- ^ Infrastructure splurge ignores smarter ways to keep growing cities moving (theconversation.com)
- ^ set at between A$5 and A$7 (grattan.edu.au)
- ^ because the politics is hard (grattan.edu.au)
- ^ as in the ACT (grattan.edu.au)
- ^ Australia's dangerous fantasy: diverting population growth to the regions (theconversation.com)
- ^ deter (taxreview.treasury.gov.au)
- ^ exposed to risks (theconversation.com)
- ^ follow another ACT lead (www.planning.act.gov.au)
- ^ corruption (www.smh.com.au)
- ^ increased (www.murphyeconomics.com.au)
- ^ Grattan Institute Orange Book 2018. State governments matter, vote wisely (theconversation.com)
- ^ are exempt (taxreview.treasury.gov.au)
Authors: Brendan Coates, Fellow, Grattan Institute