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Richardson: Diehard Lucas delivers a political masterstroke

Opinion

Despite the shock and awe of recent months, the next election won’t be fought on land tax.

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Which is probably lucky for the incumbents, because no-one could accuse the state Liberals of political finesse over the way they’ve sold their aggregation changes.

They were initially slipped into the June budget as a way of supposedly closing a “loophole” that was allowing rorters to get away with “not paying their fair share of land tax”, with Treasurer Rob Lucas insisting “there will be very little sympathy in the community” for those affected.

After it emerged there was, however, some sympathy on the Government’s own backbench and, furthermore, that Treasury had botched its annual revenue estimates by a piddling $80 million, Lucas went back to the drawing board, returning at length with a lower marginal top tax rate but an aggregation impost more than double that originally budgeted.

It was, somewhat cynically, sold as part of a broader package – which included the previously announced, and legislated, threshold increases – allowing Lucas to pass it off as a $70 million land tax cut as part of a “bold reform” measure.

When in reality it was mostly just an $86 million annual revenue measure.

The Treasurer then put the whole package out to public consultation – but only on the proviso that he wasn’t going to change any of the major elements contained therein.

So, all in all, not the smoothest political sell.

Particularly as you’d imagine most of the 200-odd feedback submissions Treasury received were strongly against the aggregation shakeup, besides the likes of SACOSS and the Australia Institute, which had long backed it as a fairness measure.

Most opponents, from various positions of self-interest, warn the change will have a cataclysmic impact on the broader economy and property market, particularly in conjunction with the ongoing revaluation by the Valuer-General.

But as it turns out, Lucas’s Clayton’s consultation may have been his political masterstroke.

After four months on the back foot, he’s finally struck strategic gold.

It’s a bit like that moment in Die Hard, when the feds show up and – entirely predictably – cut the power to the Nakatomi Plaza building, wherein a band of money-hungry gangsters are holding dozens of workers hostage while they figure out how to open a safe containing $640 million in bearer bonds.

The ensuing blackout trips the last lock, prompting master-villain Hans Gruber to preen to his henchman: “You ask for miracles, Theo – I give you the F.B.I.”

Only in this case, Lucas needed a miracle, and along came a grab-bag of interest groups, predictably and concertedly pushing their own, utterly politically insane alternatives to the Government’s land tax impost.

Why predictable?

Well, because they’re the exact same policy prescriptions these lobby groups push pretty much every budget cycle, knowing full well that no government hoping to be re-elected at some point in the next few decades will ever adopt them.

The thing is, in this case these aren’t just ambit claims; they’re genuine policy alternatives to an $86 million dollar a year revenue grab.

And of course, these various interest groups couldn’t help but throw in their two cents. After all, they don’t want to be seen as merely negative and carping – they want to be a genuine participant in the policy debate.

All of this, Lucas could foresee.

And all of this, his land tax opponents failed to foresee.

Thus, we had the Master Builders once again rolling out their firm belief that budget savings would be better realised by sacking a bunch of public servants.

More than 16,000 public servants, to be precise.

That’s right – much the same policy position that spelt the beginning of the end of Isobel Redmond’s career as Liberal leader.

I can’t see why any sane politician wouldn’t adopt such an ingenious revenue solution!

Then there was the Property Council, Lucas’s arch-nemesis in his land tax battle, which suggested that instead of hitting its own members with massive land tax bill increases, the Government should instead hit – well, everyone!

Yep, slug every property owner – regardless of whether it’s a home or rental – with a flat rate of 0.58 per cent. Which Lucas helpfully – and somewhat gleefully – pointed out would mean around 213,000 property owners who don’t currently pay land tax at all would instead pay an average of $1595 a year.

Again, the Property Council’s position is not new – as Lucas points out, it’s “consistent with the Property Council’s policy position it advocated four years ago at the State Tax Reform Summit”. At which Labor also floated the notion of tightening up on aggregation, before promptly dismissing it again.

Moreover, this was but one of the prospective proposals put forward by the keen-to-please Property Council, which also suggested “grandfathering” the aggregation changes – another measure popular among opponents but already ruled out by the Treasurer.

But it was inevitably the one that Lucas seized on when he duly fronted up on ABC Radio declaring: “I couldn’t believe my eyes… I just thought ‘how out of touch are the Property Council and its supporters?’ I’ve known that for a while, but this was stark… it was in black and white [and] it just demonstrates how out of touch the Property Council’s members are.”

All of which has allowed the Treasurer a platform to stand up and effectively say: “See – our land tax plan may be unpopular… but look at the alternatives!”

Which has, for now at least, completely shifted the debate from whether or not we should be introducing the aggregation measure in the first place, to: what other option have we got?

Rather than address the question at the heart of the consultation – should we more strictly enforce the existing aggregation of land tax in SA? – respondents instead sought to promote revenue-raising alternatives. And that merely validates the Government’s narrative that it has a revenue problem to begin with.

Whereas, in essence, its key problem here is that it spent years pledging to reimpose a remission on the Emergency Services Levy that would take around $90 million a year off the budget bottom line.

I could never quite work out the logic of doing that – after all, it was Labor that wore the voter antipathy for introducing what was effectively a $90 million annual land tax increase. The Libs, if elected, would simply be the beneficiaries of it.

But, they argued, it was a matter of principle to lower the cost of living for South Australians – so they wound it back, and good on them.

Except that they then realised they had a $90 million budget hole to fill, and fill it they did. With – that’s right – a measure that is effectively an equivalent annual land tax increase.

Then, of course, a couple of years back the Libs – backed vigorously by their then-friends at the Property Council – campaigned vigorously to oppose yet another $90 million annual revenue measure: then-Treasurer Tom Koutsantonis’s much-maligned bank tax.

That ill-fated tax, billed as an attack on the top end of town, was opposed, in part, because it would likely see fees and charges rise for everyday South Australians, and moreover provide a disincentive to invest in the state.

Which, coincidentally, is much the same rationale Isobel “sack 25,000 public servants” Redmond gave in this slightly odd Youtube chat with real estate doyen Anthony Toop, a month out from the 2010 election, for opposing land tax aggregation altogether.

“We have obviously this problem with multiple holdings,” she noted at the time, as she lamented the huge impost of land tax in SA relative to the rest of the country.

“In SA, the properties that you own, other than the ones you live in, the total value of those is put together to assess your land tax [so] a lot of people have a lot more [land] value than they expected, and that – together with the fact the rate is so high – means our land tax in this state is simply uncompetitive,” she said.

Which, she added, had broader social and economic consequences.

“Even if you’re not directly getting a land tax bill – we are all paying land tax,” Redmond warned.

“Because almost all businesses in this state run out of rented premises [so] there’s a landlord who’s getting a land tax bill, and he’s passing it on to the tenant – who’s your shopkeeper or whoever – and they’re passing it on to you… so we are all, in a way, paying land tax.

“But more importantly, what it’s doing is forcing investment out of the state.”

Nine years on, the Liberal Party’s policy is not merely to retain aggregation, but to enforce it more rigidly, ostensibly on fairness grounds.

It’s an odd gambit, if only because if the Liberals continue to try to govern like a Labor Government, voters may well decide that they’re no worse off electing the genuine article.

Still, much like those 2014 ESL increases, the next election won’t be fought on land tax.

But it will likely be fought on economic management, jobs and the Libs’ ability to live up to their mantra of lowering the cost of living.

And moreover, Lucas has now ensured that the rift with influential sections of the Liberal base is an enduring one.

All of which makes the current and ongoing debate on land tax nonetheless potentially pivotal to deciding who forms government in March 2022.

Lucas won’t be in the chair by then, of course – but the old political warhorse has at least one battle left in him.

And as Sun Tzu said in The Art of War, “the opportunity of defeating the enemy is provided by the enemy himself”.

It certainly was this week.

Tom Richardson is a senior reporter at InDaily.

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