AXE THE COUNCIL TAX
The Council Tax punishes pensioners and people on low incomes. They pay a far higher proportion of their income in tax than the very rich do. A Local Income Tax is based very simply on your ability to pay. It would be run through the existing Inland Revenue Income Tax mechanism - so saving hundreds of millions - while at the same time ensuring that the typical households pay hundreds of pounds less, especially pensioners.
You can watch Tom Brake MP explain what we would do:
Council Tax is the most unpopular tax in Britain today - because it's the
most unfair tax.
The Council Tax was dreamt up by the Conservatives, but
Labour has made it even worse, with bills rocketing. It’s just not right to
force people on incomes as low as £12,000 a year to hand over a thousand pounds
or more in Council Tax. People on low incomes can pay more than many top
earners. Nationally, the poorest 10% pay over 4 times more of their income in
council tax than the richest 10%.
Council Tax is not just unfair. It
undermines local accountability because councils only raise about 25% of the
money they spend in Council Tax. The rest comes in the form of a grant from
central government. But he who pays the piper calls the tune – so central
government has the power to tell councils what to do, overriding the wishes of
local people.
So the question for all Britain''s political parties is,
what would you do? Labour and the Conservatives would do nothing different. For
Liberal Democrats, the only credible answer is to scrap council tax completely,
and replace it with a tax related to ability to pay - a local income
tax.
Liberal Democrats believe local income tax is the best
alternative for 5 reasons:
Fairness - local income tax has fairness "built in", as it is related to ability to pay
Efficiency - it is cheaper to administer, needing no special bureaucracy or benefit system
Decentralisation - it allows national income tax to be cut, with tax power pushed down
Greater accountability - by raising tax closer to people, it strengthens local democracy
Tried and tested - international experience is successful, from the USA to Sweden
Fairness
Britain has an extremely unfair tax system. Taking all taxes, the richest 20%
of the population pay out 35.6% of their income in taxes, whereas the poorest
20% pay out 36.4%. That is simply unfair. Council Tax is one of the worst
offenders, with the poorest paying four times as much as the rich as a
proportion of income. Replacing it with a fair local income tax would be a
major step towards fair taxes for everyone.
Efficiency
Council Tax requires two
special bureaucracies – one to collect the tax and another to operate Council
Tax benefit. In 2003/04, the administration costs were £670 million in England
alone. Local income tax "piggybacks" on an existing bureaucracy - PAYE - and as
local income tax has fairness built in, it needs no benefit system. This will
save at least £300 million every year.
Decentralisation
The other political
parties have started to talk about "new localism" and "decentralisation" even
though they both have a bad record on giving power to local people. Yet if this
is to mean anything, it must involve taking power away from Whitehall and giving
it to local councils. Local income tax allows this. National income tax could be
gradually cut, enabling local income tax to rise, penny for penny. No other tax
allows this transparent and genuine decentralisation.
Accountability
Accountability would be
stonger under a local income tax for 3 main reasons. First, more of a council's
budget would come from local people, and less from central grant: councillors
won't be able to blame Whitehall. Second, the collection system makes sure
taxpayers know their local rate, and how it compares. Third, there are more
income taxpayers than council taxpayers, so more people will be aware of the
cost of their council.
Tried and
tested
Local income tax already works, for example in the
USA. In several countries with different political cultures and
geographies local income tax is a tried and tested. Countries with a local
income tax include America, Japan and Denmark.
What we would do
tomorrow
We would scrap council tax and replace it with a
local income tax at an average of 3.5% - cutting the tax burden overall for most
pensioners and households, with no rise in the overall tax burden.
What the Conservatives would
do
The Conservatives would keep the Council Tax. The
Conservative front bench spokesperson, Caroline Spelman, said the council tax
“is the best, or ‘least bad’ system on offer” and former leader Michael Howard
said it was “the fairest form of local taxation there is”. Well they would
wouldn’t they?
More information about our proposals is available on the website http://www.axe-the-tax.org.uk.
