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Fund Local Authorities with local income tax.

Comment 20th July 2010

The concept of Council Tax was ill thought out and rushed in as a knee jerk response to replace the Community Charge.  The Community Charge was an excellent idea because it was based on the not unreasonable notion that everyone in a society should contribute to funding the services which they all receive in one way or another.  One person living alone would sensibly pay less than a family of 4 or 5 or more living in an identical property next door.

The old rating system was totally bankrupt and becoming untenable and unworkable; it needed replacing.  Whether or not the Community Charge was the ideal solution to replace it is open to debat,e but what I firmly beleive most people would agree with is that Council Tax is now in the same boat as the former rating system at the end of its life.  Council Tax combines the worst aspects of both the rating system and the Community Charge in that it presupposes that the house you live in is in direct correlation to your personal wealth and hence your ability to pay; it then also includes any other people in the property when over the age of 18 but does not make them responsible for their contribution, hence the entire burden falls on the householder.

Many thousands of people bought properties during the period of the Community Charge, properties they would not have considered previously because of the burden of rates.  These same people are now assumed to be of a certain wealth for no better reason than the Council Tax band which their property has arbiitrarily been put into when they are actually no better off than they were previously.

Council Tax has increased remorselessly and it is the higher bands which take most of the starin because the percentage increase is applied to an ever increasing larger sum than is the case in the lower bands.  That having been said the overall level of Council Tax is now as untenable and unrealistic as was the former Rates System.  On a personal note our Council Tax has increased by around 185% since we have been in our property; would that our income had similarly increased.

Council Tax is putting the same artificial brake on the housing market that Rates did and making it particularly difficult for people to get onto the housing ladder even if they can get a mortgage because they still have to consider the onerous burden of ongoing Council Tax.  A mortgage does eventually end, Council Tax doesn't; even if you can afford the house the Council Tax makes it an unrealistic option to purchase a house that is otherwise affordable.

It used to be a Liberal Democrat policy to replace Council Tax with a local income tax and I would fully support this idea should it be resurrected.  The only proviso I would make is that it should be administered by the Inland Revenue and not the Local Authorities and it should be a set at a uniform rate, not variable from one council area to another; any genuine shortfalls being made up from the government support grants.  It makes ultimate sense that those who can afford to pay should pay and your ability to pay should not be based, and more often than not erroneously, on the banding of your house.

Whether or not a local income tax is introduced Council Tax is desperately in need of reform to ease the burden it has now become for thousands of households across the country whose Council Tax is actually more than they pay for their mortgage.

Why does this matter?

The idea to replace Council Tax with a system based on peoples direct ability to pay rather than an assumed ability to pay is important because:

  • It recognises the inalienable human right to quality of life and that you should pay according to your means and not an accident of accommodation. 
  • It also recognises that there are large numbers of people who are not wealthy.
  • There are those who have perhaps inherited a family home in which they have lived all of their life.
  • There are those who have lost their income.
  • There are those who have increased their income and would be automatically charged more.
  • There are households of several wage earners who should all be responsible for their contribution to the local authority finances. not just the householder who may actually be earning much less than other members of the household.
  • It is a fairer system because you are not increasingly and incrementally taxed more than your peers because your house happens to have been put into a higher band.
  • It would stimulate the housing market by increasing peoples' ambitions to buy houses previously not considered due to the level of Council Tax.
  • It is grossly unfair, iniquitous and unsustainable to continue with Council Tax, it is crippling people.
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