NSW budget blazes the trail for post-covid economic reform
Updated: May 19, 2021
New South Wales Treasurer Dominic Perrottet and the Berejiklian government should be commended for the structural reforms in yesterday’s state budget.
It lowers the payroll tax from 5.45 per cent to 4.85 per cent and increases the payroll tax-free threshold by an additional $200,000 to $1.2 million; replaces stamp duty with a broad-based land tax for new property purchases; reduces burdensome regulations.
These historic changes will help millions of Australians achieve their financial goals. For too long inefficient taxes and burdensome regulations have slowed and stopped Australians from pursuing their dreams.
Businesses failed to expand because they couldn’t afford the additional cost of hiring new employees. Individuals couldn’t purchase homes because they couldn’t save enough for both a deposit and the stamp duty.
COVID- 19 has made these governmental failings even more evident. At a time when every dollar counts to ordinary Australians, the government cannot allow wasteful systems to continue. In May, the Australian Taxpayers’ Alliance released their five-point policy proposal for a post COVID-19 Australia. The plan included calls for:
Deregulation: Use cuts to red tape as a fiscal stimulus to jump-start the economy.
Decentralisation of power: Shrink the federal government and put more money back into the hand of the state, local governments, and individual people.
Taxation: Implement structural tax reform and get rid of government waste caused by inefficient and costly taxes.
It has been rewarding to see so many of these ideas make it into the NSW Budget. COVID-19 has opened the eyes of many of us to serious structural problems with the way we tax and regulate people.
So many inefficiencies occur at the state level, but the federal government controls the bulk of the tax revenue. The NSW government is spearheading a move to greater state independence by moving forward with reforms regardless of federal support.
By cutting payroll tax, the NSW government is making it easier for businesses to hire workers and pay better salaries.
For years the government has handicapped the housing market with the stamp duty. By switching to a low broad-based land tax, many Australians can turn their dream of buying a home into a reality. The switch acts as a tax cut for millions but in the long run doesn’t hurt government revenue.
In his speech, Perottet promised not to reimplement unnecessary regulations and to allow businesses to use that additional freedom to innovate. It’s good to see the NSW government using this crisis to make the government better instead of grabbing more power. The other states should follow their lead.
This article first appeared in the Spectator Australia on 18 November 2020.