We have previously commented on reports of the purported revenue-neutrality and economic benefits of the reforms, and noted those reports did little more than support a conceptual case for them - which is in any event universally accepted - but failed to address serious questions about how they have been implemented. Unfortunately, similar observations may be made about the questions asked of the TTPI and NATSEM by the ACT government, and its report.

In the distributional analysis the consultants assumed the reform was revenue-neutral. That assumption, as we have previously illustrated, is not correct. One of the conclusions of the analysis is that the rates system is more progressive now than it was in 2011-12. However, in that year, which is before the reform, the value-based charge in general rates was flat. The reform introduced increasing marginal tax rates based on unimproved land value. That the rates system became more progressive from 2011-12 to 2012-13 and onwards can, therefore, be taken as a given. That is not, however, the issue. The real question is: have the significant incremental transfers of conveyance (stamp) duty to rates since 2012-13 been progressive?

The change from 2011-12 to 2012-13 was, as expected, progressive. Since then it has been regressive with the highest increase in the effective tax rate occurring at the lower end of land values.

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The ACT's Taxation Review Panel, in its report to government, warned of this danger when it noted: "The analysis presented in this report indicates that there are likely to be significant distributional impacts in any transition to efficient tax bases. The impacts for lower income groups can be ameliorated through progressive tax settings."

Sadly, the government ignored this advice.

The consultants' modelling includes a possible increase in dwelling prices due to the modelled increase in housing market activity resulting from a decrease in stamp duty, but not due to any other policies. The assumption is not unusual in the context of an academic study. In reality, however, the most significant factor in the increase in house prices in Canberra, and confirmation of just how brutally predictable is the law of supply and demand, is the ACT government policy of land supply constraint, with the four-year supply decreasing from 19,500 sites in 2012-13 to 15,600 in the 2019-20 budget. Taking into account the increase in house prices in the real economy, driven almost entirely by a cap on supply, a purchaser of a median priced house in Canberra in 2018-19 paid approximately $3300 more in conveyance duty, and $206,000 more in total costs compared to a median priced purchase in 2011-12.

Notwithstanding the above limitations, the combined effect of conveyance duty and rates changes as a proportion of income in the consultants' modelling has been largest and negative for households in the lowest income quintile - a result that regrettably did not receive any attention from the chief minister or, that matter, the media, with the focus being directed instead to the impact by wealth quintile.

In the consultants' modelling, since 2012-13, as a proportion of income, costs for the lowest income quintile have increased by approximately 0.6 per cent, compared to an increase of 0.1 per cent for those in the highest income quintile. Interestingly, however, the results are quite different when viewed by wealth quintile. As a proportion of income, households in the highest wealth quintile had the highest increase at approximately 0.4 per cent, followed by those in the lowest wealth quintile at approximately 0.2 per cent of the income. This divergence can be reconciled by noting the largest component of household wealth is commonly the family home, and a substantial proportion of people in a high wealth quintile are retirees and pensioners with relatively low incomes.

The Taxation Review Panel recommended utilising the concession system to 'cushion' the distributional impacts of the reform, a recommendation the ACT government formally agreed to in its response to then panel's report but which it has not acted on.

In reality, the concession system has been progressively eroded. In 2012-13 a pensioner paid $42.40 for fixed rates and the Fire and Emergency Services Levy net of pensioner rebates. By 2019-20 the ACT government had increased this impost on pensioners tenfold, to $421.

Based on the ACT's income distribution, the "value" of a dollar for a low-income household is around two-and-a-half times more than that for a median-income household. The welfare impacts on lower income households have, therefore, been much more severe than the actual dollar increase suggests. The fact that low-income households in the ACT have been hit with the highest increase in the effective tax rate is not progressive and, we think, should be neither maintained nor celebrated.