MSE News: Charity calls for council tax reform

CTA_2

bell wrote: »

Also VAT is really not an tax on non-essential spending anymore, given that it has been expanded since its introduction to include all manner of things (especially food).

Its horribly regressive as any hike in it, hits lower income households way harder as a percentage of income.

I will have to completely disagree with this I am afraid. Food generally is still zero rated, only "unhealthy" items are typically standard rated.

Those goods and services which are vital to low income families are typically exempt or zero-rated.

An increase in VAT is felt by higher earners more so than low earners.

mr_jrt

CTA wrote: »

Cannot ever see how or why council tax should be based on income. It is a tax in respect of services provided and those services are provided equally to each household.

Income tax is progressive, not every tax has to be progressive. Indeed, a "good" tax should be one people agree with.

What does how much i earn affect the services I receive from the council? If anything, earning more would probably equate to fewer services used.

...and therein lies the crux of the issue of taxation. Apologies for the misuse of the terms (and please take this as a generalisation and not a targeted comment), but essentially it's socialism versus capitalism. The better-off can afford to pay more, but want to pay only for what they need so as to pay less, and the less well-of cannot afford to pay for what they need, so need subsidy.

In a nutshell, flat-rate taxes are disproportionately unfair for those on below-average incomes, whilst progressive taxes are unfair for those on above-average incomes. The difference as I see it is that the better-off still remain better-off when taxed more, so that makes it the lesser of two evils in my eyes.

Council tax attempts to work around the issues of a flat tax by introducing the bands that assume that those who spend more on their housing can afford to pay more tax. This however is not true - case in point, me. I decided that I don't spend much on luxuries and entertainment so I could afford to pay more for my housing and get somewhere nicer. To reward me for this decision I get to pay ~£30/mo more as my flat is in band C.

It also then has to deal with those on very low incomes with council tax benefit, and the Byzantine system required to administrate that. A local income tax is cheaper to administer and is inherently fairer, so solves both problems at once.

lazer

bell wrote: »

Also VAT is really not an tax on non-essential spending anymore, given that it has been expanded since its introduction to include all manner of things (especially food).

Its horribly regressive as any hike in it, hits lower income households way harder as a percentage of income.

Fresh Food and basic foods are still zero rated - processed unhealthy food is not.

Its hit lower incomes as people on lower incomes tend to sepnd all of their disposable income, whereas people on higher incomes tend to save some - which is simply deferring it.
I see it as a generally avoidable tax - and would fully support even a 5% hike in the standard rate if coupled with a review of zero rated and exempt items.

CTA_2

mr_jrt wrote: »

...and therein lies the crux of the issue of taxation. Apologies for the misuse of the terms (and please take this as a generalisation and not a targeted comment), but essentially it's socialism versus capitalism. The better-off can afford to pay more, but want to pay only for what they need so as to pay less, and the less well-of cannot afford to pay for what they need, so need subsidy.

In a nutshell, flat-rate taxes are disproportionately unfair for those on below-average incomes, whilst progressive taxes are unfair for those on above-average incomes. The difference as I see it is that the better-off still remain better-off when taxed more, so that makes it the lesser of two evils in my eyes.

Council tax attempts to work around the issues of a flat tax by introducing the bands that assume that those who spend more on their housing can afford to pay more tax. This however is not true - case in point, me. I decided that I don't spend much on luxuries and entertainment so I could afford to pay more for my housing and get somewhere nicer. To reward me for this decision I get to pay ~£30/mo more as my flat is in band C.

It also then has to deal with those on very low incomes with council tax benefit, and the Byzantine system required to administrate that. A local income tax is cheaper to administer and is inherently fairer, so solves both problems at once.

A local income tax is completely unfair. I work in London, earn a London salary but live away from London and commute daily. Why should i pay a council tax charge based on my income, the justification of which is to receive services from my local council, well in excess of the cost of the services provided.

This notion of having an income based council tax is fanciful. Income tax is a primary measure to redistribute wealth, we do not need two taxes attempting to achieve the same end.

JimmyTheWig

Butterfly_Brain wrote: »

I think that a much fairer system would be a council tax based on income.

This would be fair if it were done accurately.
But we constantly hear of "the rich" using accountants and various loopholes to reduce their income tax bill. While the rest of us end up being clobbered.

The chances are that someone who has lots of money will want to live in an expensive property. And so they'll pay a high council tax.
It's not so easy for them to get out of. Most rich people won't choose to live in a cheap property just to get out of paying higher council tax.

CTA_2

JimmyTheWig wrote: »

This would be fair if it were done accurately.
But we constantly hear of "the rich" using accountants and various loopholes to reduce their income tax bill. While the rest of us end up being clobbered.

The chances are that someone who has lots of money will want to live in an expensive property. And so they'll pay a high council tax.
It's not so easy for them to get out of. Most rich people won't choose to live in a cheap property just to get out of paying higher council tax.

Fair for whom exactly? It wouldn't be fair at all actually.

molerat

CTA wrote: »

Cannot ever see how or why council tax should be based on income. It is a tax in respect of services provided and those services are provided equally to each household.

Income tax is progressive, not every tax has to be progressive. Indeed, a "good" tax should be one people agree with.

What does how much i earn affect the services I receive from the council? If anything, earning more would probably equate to fewer services used.

Here's a good idea, a per person tax so everyone pays equally for the services they are eligible to receive. As the poorer end of the spectrum generally consume a greater amount of the services then it will be a fair tax.

Poppie68

Butterfly_Brain wrote: »

I think that a much fairer system would be a council tax based on income.

What so the workers will get screwed as usual?

CTA_2

molerat wrote: »

Here's a good idea, a per person tax so everyone pays equally for the services they are eligible to receive. As the poorer end of the spectrum generally consume a greater amount of the services then it will be a fair tax.

You contradict yourself.

A tax based on eligibility to receive services yes, not based on actual consumption. That would be a fair tax if everyone paid an equal rate.

molerat

CTA wrote: »

You contradict yourself.

A tax based on eligibility to receive services yes, not based on actual consumption. That would be a fair tax if everyone paid an equal rate.

Everyone would pay an equal amount. It was slightly tongue in cheek because the last time it was tried those that consumed the most per person complained it was unfair as they paid the same as those that consumed little both per person and per household.