Many land-owning Victorians are excited about the promised land tax refief to be offered in the 3 May budget and Treasurer John Brumby is wrestling with the detail after Premier Steve Bracks foreshadowed some cuts and then promptely left the country for two weeks.
I’ve got a confession to make here. One of the reasons land tax revenue has soared from $378 million in 1998-99 to a forecast $1.04 billion in 2005-06 is because of the successful spinning effort when former Treasurer Alan Stockdale literally doubled the land tax rates in the 1993 budget as follows:
$200,000-$540,000 (doubled from 0.15% to 0.3%)
$540,000-$2.7m (doubled from 1.5% to 3%)
Above $2.7m (almost doubled from 3% to 5%)
As his press secretary at the time, the budget was facing a $175 million hit as tumbling land valuations from the recession we had to have came through the system. The land tax changes were the only bad news so we leaked a big infrastructure spending program to the Herald Sun and scored a front page exclusive on the Saturday before the budget.
The compensating crumb for The Age was the land tax changes but the expected backlash didn’t come. The day after the budget the Herald Sun ran a page one picture of kiddies in the school yard because nine new schools were announced. However, this picture story on the land tax changes also appeared:
Fashion boutique owner Georgina Weir feels stripped of business incentive. Like many other traders hoping for land cuts to compensate for plummeting property values, she believes the State Government’s “unfair and hideous” slug is sending people to the wall. She said the crippling cost was eating into profit margins at a time when retailers could least afford it.
Georgina, who took over the Le Louvre shop in Collins St from her mother 30 years ago, said she was forced to borrow to pay this year’s $7,300 land tax bill. “It’s an unfair and hideous tax. I live in fear each year when it comes in,” she said.
We reacted immediately as the Treasurer called Herald Sun editor Alan Oakley and was pictured with Georgina in the following day’s paper soothing her concerns and literally putting the story to rest. If Stockdale had been forced to commit to reduce those land tax rates when valuations recovered, we wouldn’t have the land tax debate that is taking up so much newspaper space in Victoria today.
Check out the current land tax rates here and you’ll see that the Bracks Government is running a regime that is far more punitive than what the Kirner Government handed over to the Kennett Government in 1992. Kirner slugged properties worth between $1.6m and $2.7m just 1.5%, yet Bracks is hitting them for 3%.
Stockdale doubled the rates to simply maintain revenue at around $400 million a year, something which continued until 1998-99. It wasn’t until the great properly bubble emerged that revenue started to soar and Victoria’s nation-leading rates at the top end started sending many businesses to the wall and creating political headaches for the government.
A whopping 4% every year for properties worth more than $2.7 million is just a staggering slug and not even NSW, with its crazy new vendor tax, can top that. Investors have headed for Queensland in their droves since Carr’s vendor tax was introduced so the Bracks Government has a chance to bring some of them to Victoria if he does something comprehensive on land tax on 3 May.
Failure to act will just confirm that he has recklessly blown the budget on excessive public sector wage deals over the past five years.