Originally published in the Daily Telegraph, 2 November 2016

Housing affordability is more an issue in NSW than anywhere else in the country and it has brought back to light an idea that's time may have come.

While the federal government has exited the tax reform stage, the NSW government is talking about removing or replacing inefficient state taxes, such as stamp duty on real property.

Stamp duty is a transaction tax. It is a giant hit to the hip pocket and is a significant disincentive to a more freely operating real property market.

Investors tend to hold property longer, and during this holding period they frequently do not seek to maximise their returns on the investment.

This is where the expression "land banking" comes from. Conversely, potential investors and new entrants to the real property market are discouraged from investing because of the high transaction costs imposed.

This is not a new idea. It is a view widely held by economists and was a recommendation to the treasurer from the 2010 Australia's Future Tax System Review.

There are a raft of equity issues that need to be considered as part of the design of any such tax mix switch but the potential benefits should be incentive enough to get the design right. For example, there would need to be consideration of the transitional rules with a gradual withdrawal of conveyancing duty and the introduction of the replacement land tax over a number of years.

The Baird government's willingness to investigate a broader land tax, and to get rid of stamp duty, shows a recognition that reforming our tax system and getting the tax mix right is critical to dealing with the demographic, social, economic and environmental challenges of the 21st century.

Of course it's not just NSW. The ACT is several years into a 20-year transitioning to land taxes.

Yes, it's controversial, but the government was recently re-elected.

South Australia has proposed the same for commercial property conveyances from 2018. The week began with Treasurer Scott Morrison talking about the housing affordability challenge with an emphasis on supply side constraints, in particular he acknowledged the issues associated with transaction taxes.

He was encouraging the states, territories and municipal councils to take action to address the housing supply shortage. The cynical may say he was also seeking to distance the federal government from the problem.

Eventually the federal government will have to address the elephant in the room and start to talk about genuine tax reform but the NSW government's openness to exploring reform shows it isn't waiting for its federal counterpart to get its act together.