State Led Tax Reform

By David Shaw, CEO & Founder WSC Group

Normally, it is the domain of the Federal Government to push tax reform but in recent times, the states have been leading the way in suggesting reforms to their very inefficient state-based tax system. One of the problems with our federation is that the states don’t technically have the power to tax, and this has resulted in them dreaming up a number of anti-economic levies to keep the state revenue coffers filled.

There are four (4) taxes that need to be changed:

1. Stamp Duty – Should be replaced by an annual land tax fee so the cost of moving between properties is worn by the taxpayer over a long period of time. This would be similar to some of the state-based taxation systems in the US and would not disincentivise downsizers or upsizers in the market.
2. Payroll Tax – Fancy dreaming up a tax that penalises a business for the more employees they employ! In an urgent need of an overhaul with the threshold going from $1M to $100M payroll. Small Business should not pay payroll tax.
3. Registrations, Fuel Excise and Car Insurance Stamp Duty – Why not replace this with a user pays system such as a congestion tax or a tax on the use of roads on a kilometre basis? (It is hard to wind back speedometers these days so it is harder to cheat!)
4. GST – Although this isn’t a state-based tax, the states get the majority of the GST revenue. There are two ways you can increase GST revenue (1) broaden the base of the tax (currently GST only applies to just over 50% of goods and services) and (2) increase the rate. In order to increase the GST rate, all states and the federal government must agree as per the GST legislation. You just never know, this may be a once in a life time opportunity to get the impossible to occur so that we have a more efficient tax system all around.

Lots to do and think about for us as voters and for the federal and state politicians.