A few years back in 1696 King William III came up with an idea for a tax on prosperity that avoided the controversy that surrounded income taxes at the time.
Willy’s Window Tax had two parts – a flat rate of two shillings per house and a variable component of four shillings for houses containing ten to twenty windows, and eight shillings for those with more than twenty.
Different versions of a window tax were introduced across England, Scotland, Ireland and France, the last of them repealed by the French in 1926. The beauty of the window tax was the simplicity of assessment from the outside of the property. Plus, it was great for the stonemasons – there are still examples of houses from that period with bricked up windows in an attempt to lower their taxes.
Despite the window tax losing favour 100 years ago, there are recent examples of housing-based taxes on prosperity.
In 2023, Los Angeles introduced a mansion tax levied at 4% on all properties sold for more than US$5 million, increasing to 5.5% above US$10 million, with the revenue being applied to affordable housing and homelessness programs.
The tax raised US$215 million in its first year, far less than the US$900 million that was projected. Apparently, there was a number of sales at exactly US$4,999,999, as well as an increase in sub-divisions so that properties were valued at less than the threshold. Critics suggest that the tax hampered the market, with a 68% drop in luxury home sales in the first year.
Westminster London has also reverted to property-based prosperity taxes, imposing a tariff on houses valued at more than £10 million to fund homelessness services.
We have no such tax in Australia, although state governments generally levy land tax at progressively higher rates based on values. In 2022 the NSW Greens proposed an Extreme Wealth Property Tax on luxury Sydney mansions at 4% for properties valued at $10 million (vacant) or $20 million (improved).
Australia’s most recent mid-year economic outlook predicts that China’s weaker economy will cause a drop of $100 billion in mining exports resulting in an $8.5 billion hit to company tax over the next four years, leaving a hole in the federal budget.
This revelation comes as the government unveils a new agreement with States and Territories to use $3 billion from its Housing Australia Future Fund to build 5,000 new homes. That’s a lot of windows.
If Jim Chalmers wants a better mid-year outlook, there’s a clear opening for an Aussie window tax to ease the upcoming financial pane. Some might consider this a pane in the glass, but I see a solid casement for such an impost.
by MARK DOUGLAS
FCPA
Managing Partner of Francis A Jones
www.faj.com.au