How NSW Premier Dominic Perrottet can channel Joh on tax

Dominic Perrottet can become the Joh Bjelke-Petersen of the 21st century by reforming property stamp duty.

NSW Premier Dominic Perrottet, above, ‘has asserted the ultimate primacy not of himself or even of his government more broadly, but of the people of NSW’. Picture: NCA NewsWire / Adam Yip

Let me make my humble contribution to kicking off Dominic Perrottet’s premiership with two helpful suggestions.

Let me also note that he has already kicked it off in exceptionally impressive fashion all on his own, by doing something that no other premier has done in the 20 months, and counting, of the ­pandemic.

That is, to assert, to emphatically state, and to visually demonstrate the primacy of the governing politician as the decision-maker with the virus as with everything else in their state; and so more specifically, that it is at the desk of the premier at which the proverbial buck – and, bluntly, the all-too-literal death – stops.

That no chief health officers, no matter how wise and all-knowing – and I would respectfully suggest, both are open to, well, question – are not and must never be the governing decision-makers.

They are advisers and their advice must be mixed with other advice focused on the full portfolio of issues and objectives which are the responsibility of the governing politician; and then ­indeed, to the subjective decision-making judgment of, and execution by, the politician, who in turn is directly answerable to the people.

In hitting the ground running on Thursday morning by absenting CHO Kerry Chant – who, I might add, has streeted all her peers through the pandemic – the Premier asserted the ultimate primacy not of himself or even of his government more broadly, but of the people of NSW.

My first piece of advice is how he can become the Joh Bjelke-Petersen of the 21st century.

Let me hasten to add, in the area of taxation alone. Very simply, that he can emulate what Joh did in the 1970s.

In 1977, when Joh abolished death duties in Queensland, he abolished them for the entire country.

Every other state had to follow and every other state did follow, immediately.

Before we reached the 1980s they had gone everywhere, right across Australia, including at the federal level.

As treasurer in his 2020 budget, Perrottet unveiled a proposal – actually, more of a “good idea at the time” – to abolish stamp duty on property transactions.

It would be replaced by an annual property tax, which would be combined with the existing land tax into a single impost.

The proposal, though, was an utterly unworkable shambolic mess – just exactly what you should expect from typical Treasury (state as much as federal) lack of imagination, combined with the seemingly obligatory ­bureaucratic clunk.

In simplistic terms you could not switch in one hit from stamp duty, which is projected to raise $11.4bn this current year, and will in fact raise substantially more, to an annual land tax that would raise, say, $500m.

That would be too big a – and repeating every year – hit to the budget. So, Treasury proposed a property buyer could choose between the new annual property tax and the existing one-off stamp duty. Subject to limits as to how many could choose.

Yes, that would limit the hit, but even so Perrottet said it would cost $11bn over the first four years.

And it would still postpone real effective reform for years, if not decades.

There is a very simple way to get a straight, total, shift from one-off stamp duty to annual property tax: capitalise the future property tax revenues and securitise them in a new triple-A investment product.

You set a switch-over date; let’s say July 1, 2022. From that date, stamp duty is abolished and all properties bought in NSW will be subject to the new annual property tax.

You then tender to investment banks and/or institutional investors to buy the right to those revenue flows for a set number of years in return for paying upfront the stamp duty that would otherwise be paid in that year.

The revenues of the state budget don’t miss a beat, and certainly not the $11bn under the shambolic proposal suggested.

Global investors, desperate for somewhere to invest the tens of trillions of dollars now sloshing around the world, would rush this additional, novel and very ­attractive triple-A investment option – a taxation-guaranteed amortising bond.

And which, so, would have it priced very keenly, to the benefit of NSW taxpayers.

With a conventional bond, you get an annual interest payment of, these days, 1-2 per cent – with the capital repaid at the end.

With this security, you would get the interest payment plus a portion of the capital paid each year – finishing at zero in, say, year 20.

Yes, Premier, you can have your real reform cake and get to eat exactly the same tax revenues each year.

But, please, Premier, you were engaging in (Keating-style) terminological inexactitudes, when you claimed, as treasurer, that “over the longer term, the property tax would be revenue neutral, collecting the same amount of revenue as stamp duty and land tax”.

At some point there would be a crossover point, as the property tax is a forever tax and would be paid off current land values each year, whereas the implied future annual revenue stream of a once-off stamp duty is capitalised in a single payment based on an earlier, one-off, lower land value.

Assuming nominal property prices will always keep rising, this is a proposal for an ever-rising tax on property, very much like bracket creep with income tax, and for exactly the same reason. Subject only, in both cases, to governments generously giving the excess back via so-called tax “cuts”. Maybe.

My second piece of advice to the new Premier is to keep a tight rein on the Malcolm Turnbull-style twittering twerp he has ­“appointed” to succeed him as Treasurer.

To be more exact, who was the price (or one of the prices?) of the factional dealing that gave him his overwhelming 39-5 endorsement as Premier and his choice of deputy.

Matt Kean is an irritating inanely woke idiot, but under firm control he can be rendered relatively harmless as Treasurer. Better him there than in energy and environment, where his idiocy was doing real damage.