Victoria is increasing ‘the worst tax’ in bid to raise $2.7 billion

Economists are warning the stamp duty tax hikes in the state budget will hurt more than just high-income earners.

In an attempt to raise $2.7 billion over the next four years, stamp duty will be increased on properties worth over $2 million.

But economist Saul Eslake says stamp duty is widely regarded as “the worst tax”.

“It has the greatest welfare cost that is borne by society, the economy as a whole,” he told Ross and Russel.

“Why should someone who lives in the same home for 25 years make no contribution to the cost of providing police, schools, hospitals, roads, child protection and the other services that we expect state governments to provide?

“Whereas someone whose circumstances dictate that they move three or four times in 25 years … why should that person contribute much more to the cost of providing state-type services because he or she has to pay stamp duty?”

Mr Eslake led a tax review for Victorian Treasurer Tim Pallas in 2017, recommending stamp duty be replayed with a broad land tax.

He says land tax is a much better taxation system.

“It doesn’t really distort investment decisions in the way most other taxes do,” he said.

Press PLAY below to hear which taxes Mr Eslake thinks Victoria should increase instead

The Victorians who will be affected by the state’s $2.7 billion tax hike