STATE taxes based on home values are the fairest, according to a report that forms part of the State Government’s tax review.
Data analysis produced as part of the State Government’s tax review shows current state taxes consume more of poor people’s incomes.
The National Centre for Social and Economic Modelling report reveals that households whose average disposable income is $25,495 a year pay 5.79 per cent of that into the state’s coffers.
But households with an average disposable income of $156,193 a year pay 3.05 per cent.
Treasurer Tom Koutsantonis said the report was intended to inform the public about the impact state taxes had on household budgets.
“The NATSEM analysis shows which state taxes are considered progressive or regressive and how the impact of taxes can fall more heavily on some sections of the community than others,” he said.
High-income households pay a greater share of progressive taxes, while regressive taxes are those that have a greater impact on low income households.
Mr Koutsantonis said the Government believes state taxes must be fair.
“We need to consider what would create the most economic activity, what does the least harm to the economy and how do we continue to create the revenue we need to maintain services … while having regard to people’s ability to pay,” he said.
State tax distribution in SA
Source: The Advertiser
The analysis considered insurance tax, land tax, registration, gambling tax, motor vehicle stamp duty, housing stamp duty and the Emergency Services Levy.
It found that stamp duty was the most progressive tax because those in the lowest income group devoted $238 or 0.65 per cent of their income to it compared with $2005 or 1.21 per cent for the highest income group.
Gambling tax was shown to be highly regressive and when removed from consideration in the overall state tax burden for households, the system appears much flatter.
The report also compared the old ESL arrangements to the new charges where the Government removed concessions. It found the old approach was “mildly” regressive but the changes had made it a more progressive tax.
The Government’s tax review discussion paper, released last month, showed stamp duty was considered the most inefficient tax because it provides a disincentive for people to buy and sell property.
It raised the idea of introducing a broadbased land tax, considered a progressive and efficient tax, in place of stamp duty which would put a $1200 annual bill on homes worth $410,000 but this was met with staunch community opposition.
The NATSEM data suggests increasing that tax would meet the Government’s objectives of being fair and efficient. However, a tax on the family home would be political dynamite and such a measure would be more likely to affect those whose votes Labor doesn’t have to lose.
Mr Koutsantonis stressed that the Government had made no decisions about the outcome of the review.
“It (a broadbased land tax) would need to be something people have a say on. I don’t think it’s something the Government would just introduce into Parliament,” he said.
SA Council of Social Service executive director Ross Womersley said it was important to reform state taxes to make them fairer.
“Many tax systems are designed in ways which people who are wealthy will always pay less as a proportion than those on low incomes,” he said.
“We would like to see the reform measure that remedy that situation and that result in a fairer distribution.
“We absolutely think that everything should be on the table and people need to not just react to the idea but considered the analysis and long term outcome. A broadbased land tax in place of stamp duty could be reasonable.”
Fairer to base state taxes on household values
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