The Barr government is at risk of "tax leakage" as residents escape across the border to avoid rate rises, economic analysts have warned.
The exodus could also damage the ACT's economy in the longer term, according to a Pegasus Economics review of the 2018 budget.
The government again hiked rates in its latest budget as part of a broader transition away from stamp duty to broad-based land taxes.
While stamp duty will be abolished for certain first home buyers next year, rates for detached homeowners will rise on average by 7 per cent, while unit owners face an increase of 10 per cent.
But the 2018 Pegasus Economics review said in pursuing its tax reform, one "potential pitfall" the government had to be wary of was the risk of "tax leakage" across the border to NSW from those trying to avoid higher general rates.
While the taxation reform is being rolled out over 20 years, Pegasus said stamp duty revenue had hovered around the $300 million since 2011, while general rates revenue has increased from $200 million to just under $700 million at the end of the forward estimates.
Rates as a percentage of own-source revenue is also expected to double, from 15.8 per cent of own source revenue in 2010-11 to 30.3 per cent by the end of the forward estimates in 2021-22.
Meanwhile stamp duty as a percentage of own-source revenue is expected to fall from 22.5 per cent in 2011-12 to 13.1 per cent by 2021-22.
The Housing Industry Association warned in February the scheduled reduction in stamp duty rates was failing to exceed bracket creep due to rising property prices, with the territory reaping a $196 million windfall over the past four years as a result.
The Pegasus report said because of this bracket creep, the percentage of own-source revenue from stamp duty has "rather perversely"risen in the past two years, and is predicted to increase again this year".
It warned there was "a medium-term risk" posed by the ACT Government’s tax reform agenda that could "dampen population growth with flow on effects for economic activity".
"A point could be reached where residents/employees of the ACT seek relief from ACT government general rate increases through relocating to NSW," the report said.
The review was commissioned by the ACT parliament's Estimates committee, who began hearings on Friday.
Chief Minister Andrew Barr was in the hot seat on Monday, where he vigorously defended the tax reform.
He said even Prime Minister Malcolm Turnbull had said it required political courage of "11 out of 10".
Asked about the potential for ACT residents moving across the border to save on their rates bills, Mr Barr said such people would be expecting to “live well into their hundreds” for the move to make them financially better off.
He said moving house was “one of the more traumatic experiences in people’s lives”, but if people were determined to cross the border to save money, he would encourage them to consider other services such as health for those of “a certain age”.
“In the end, we can have all the doomsday speculation we want from various commentators, but it will be the real lived experience that will ultimately be what happens and we’ve got six years of experience now [under tax reforms],” he said.
“If I’d listened to this sort of commentary, we’d have thousands of fewer residents in the territory, we’d have gone backwards.
“None of this has transpired, none of the doomsday scenarios have transpired and if it did happen you’d reassess, but in fact it hasn’t happened and its gone the other way.”