THE huge cost of stamp duty is stopping nearly 40,000 Australian home moves each year.

Research has found abolishing the tax could help ease the housing squeeze, allowing younger families and older retirees to more easily find more suitable housing.

The total loss to the economy from reduced sales is worth around half a billion a year, according to the study by two prominent Australian economists based on millions of property transactions.

State governments receive around $12 billion a year in stamp duty revenue, but this has fallen in recent years because stagnant house prices have led to fewer transactions.

People who do move are now paying more, on average, because higher house prices push them up into higher stamp duty tax levels.

"The average stamp duty rate on house sales rose from 2.4 per cent in 1993 to 3.3 per cent in 2005 largely due to 'bracket creep' during a period of rapid house price growth rather than legislated increases in rates," the study by economist and Labor MP Andrew Leigh and Ian Davidoff, a former adviser to Julia Gillard and now an economist at the International Monetary Fund in Washington DC, found.

Every 10 per cent increase in stamp duty was found to lower property turnover by 3 per cent in the first year and 6 per cent over three years.

"Impeding housing mobility may cause individuals to forego better job offers in other regions (thereby reducing productivity of co-workers), or to commute overly long distances to a new job (thereby increasing road congestion)," the study finds.

"Housing transaction taxes may lead to misallocation of the housing stock, by effectively discouraging young families to upsize their housing and by discouraging retiree households from downsizing."

The study found that while property purchasers technically paid stamp duty, really the effect was to reduce house prices by the same amount, meaning property sellers really bore the cost of the tax.

Abolishing stamp duty would lead to property prices rising by the same amount. But increasing property turnover would be of benefit to both buyers and sellers, Dr Leigh said.

"The most important thing is that some trades that were killed by stamp duty now take place. They benefit both buyer and seller, and the value of that happiness we estimate at around $500m per year."

State treasurers took a proposal to the federal government in late 2011 to abolish their stamp duties in return for a bigger share of federal government revenue. They were dismissed by the then federal assistant treasurer David Bradbury as "ridiculous".

Stamp duties on other transactions were abolished as part of the introduction of the GST in 2000.

STATE STAMP DUTY SLUG

State/stamp duty revenue collected in 2002-03/collected in 2011-12

AUSTRALIA: $8.75 billion, $11.66 billion

NSW: $3.68 billion, $3.76 billion

VIC: $2.11 billion, $3.38 billion

QLD: $1.38 billion, $2.02 billion

SA: $428 million, $683 million

WA: $833 million, $1.34 billion

TAS: $91 million, $136 million

NT: $43 million, $93 million

ACT: $174 million, $239 million

Source: Australian Bureau of Statistics