The most disappointing policy change this century was NSW Labor’s reversal of premier Dom Perrottet’s bold attempt to gradually replace stamp duty on property transfers, one of the worst taxes of all, with a tax on unimproved land values widely considered the best.
In operation for only seven months, two-thirds of buyers, or about 8000 people, opted to pay 0.3 per cent land tax, levied on the portion of their purchase deemed to be land rather than dwellings, rather than the many tens of thousands of dollars in stamp duty.
Last week I delivered the 135th Henry George Oration in Melbourne, where I argued land tax was the most unsuccessful great idea in history. Pretty much every famous economist, from Adam Smith to Milton Friedman, has argued it was overwhelmingly the best tax of all.
Tax wages, salaries, business income or transactions, and society gets less of them; and a whole vast industry pops up to avoid paying them too. Land tax is the only tax impossible to avoid because it can’t be hidden or moved. Indeed, the only way land tax changes behaviour is by encouraging owners to use the land to generate revenue: land will never sit idle.
Friedman, hardly a socialist, called a tax on unimproved land value “the least bad tax”.
In 2017, the late John Stone, who was famously conservative, told me the capital appreciation that “accrues to landowners, particularly in our major cities, simply via the effluxion of time as growth occurs around them, is really impossible to justify”.
Imagine a thought experiment where all other taxes, including income tax, were abolished except for that on land tax: not a cent levied on incomes, a supercharged version, if you like, of the federal land tax that operated from 1910 to 1952, where Canberra taxed unimproved land values at roughly 0.4 per cent.
I did the rough sums of what a hypothetical uniform land tax might generate today. According to the Australian Bureau of Statistics, residential land was worth about $8.32 trillion at June 2025, compared with a little over $3 trillion for the dwellings built on it, (roughly a 400 per cent and 300 per cent increase, respectively, since 2006).
Across all uses, Australian land was worth about $10.38 trillion. Much of what we call housing wealth is the value of a location, not the timber, bricks or labour put into a home.
Using those figures, I calculated what a uniform annual tax on all Australian land would raise if every dollar replaced an existing tax. A rate of just 0.33 per cent would, mechanically, match the roughly $34.4bn raised by state property transfer duties in 2024-25. A rate of 1.34 per cent would match company tax revenue of $138.8bn. At 3.26 per cent, it would match the $338.3bn raised by personal income tax.
A yearly bill of $32,600 on a block of land worth $1m would be formidable, even if income tax disappeared, and would be highly unlikely to happen politically. But I suspect many people reading this column, let alone the huge class of individuals who rent, would almost certainly be far ahead after reducing their income tax to zero.
Consider the modest end of the scale. Each 0.1 percentage point on the existing residential land base equates to about $8.3bn in annual revenue before those adjustments. That is real money for reducing stamp duty or income tax, which, to be clear, are far worse taxes. It should sharpen the question we ask of any reform: What would a household pay in land tax, and which other taxes would disappear?
Chris Minns called the Perrottet reform a “forever tax”, just like council rates, and an outrageous hit to the sacred “family home”. It’s very easy to fearmonger about land tax, given many retirees might own valuable land and have little cash. Yet any transition would be optional for new buyers, as NSW briefly attempted. And anyone who had recently paid stamp duty could expect a credit for past tax paid.
Henry George’s idea was far more successful in the 19th century, being introduced in South Australia for the first time in 1885. The then premier, Frederick Holder, later that century told a visiting US senator: “I answer unhesitatingly – Yes”, when asked whether the state’s globally novel Georgist land tax had helped the state’s development.
The case for land tax should be easier today given upper houses of parliament are no longer the preserve of landowners, as they usually were then. On the other hand, many more Australians own homes than a century ago, creating a far larger class of potential taxpayers who might understandably worry a new tax wouldn’t be used to offset other, worse taxes but rather add to them. Regardless, the economic and philosophical arguments remain.
Conservatives rightly defend property rights. But they should also ask why a worker’s next dollar of earnings deserves to be taxed at double-digit rates up to 47 per cent, while the rising value of a site its owner did nothing to create isn’t taxed at all practically.
The landlord “renders no service to the community, he contributes nothing to the general welfare, he contributes nothing to the process from which his own enrichment is derived”, Winston Churchill, hardly a communist, noted in a 1909 speech.
Slashing Australian government spending should be the first priority of any new government. But the tax system is also making us poorer – except the lawyers, consultants and accountants paid to avoid tax for the clients. The most unsuccessful great idea in history deserves to play a bigger role in any future major reform of the existing system.
