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The Green Council Tax Deception

    The Green run council of Brighton and Hove is planning a referendum on a 4.75% rise in the council tax that it levies on its constituents. Instead of looking for ways to save money as so many other councils have done, the Greens want to raise council tax to pay for higher expenditure on social care services. Greens, such as here on Left Foot Forward, have portrayed this as part of some sort of fight back against ‘austerity’. So according to the Greens, raising taxes would be progressive and cutting taxes would be part of an austerity programme. All the usual criticisms of the “ideological” council tax freeze are present and of course there is also no explanation of why it is ideological to want to cut taxes but not ideological to want to increase taxes.

    Of course, there is nothing intrinsically wrong with a council wanting to increase spending on something which is valued by its constituents. They just shouldn’t try to tell people that increasing council tax is morally superior to reforming the provision of services and making savings elsewhere.

    The Government’s policy on Council Tax has essentially been to use the revenue raised from general taxation to pay councils to keep council tax low. Ultimately this means that this particular policy has not actually led to a reduction in the tax burden but has been more of a tax switch; not cutting the burden of general taxation as much in order to cut the burden of council tax. It would of course be preferable for councils to cut council tax themselves as many have done. A remarkable period of innovation at the level of local government has led to many cost-saving initiatives allowing many councils to cut tax of their own accord.

    Whilst the Government’s policy may not be an overall cut in the tax burden, given the regressive nature of Council Tax, the Greens should have no excuse not to support this progressive and redistributive tax switch.

    Despite the use of various bands, council tax remains a particularly regressive tax. The ONS breaks down the impact of taxes and benefits on households of different incomes. Using the latest available data for 2011/12, we can see fairly easily the extent to which Council Tax hits households with a lower income relative to those with higher incomes. Indeed, council tax paid by the poorest tenth of households is 18.4% of their original income (primarily wages and salaries) compared to 1.6% of the original income of the richest tenth of households. If we look at council tax as a proportion of gross income ie including benefits, then it takes up 6.9% of the gross income of the poorest decile and 1.5% of the richest decile.

    If the Greens (and others on the Left) measure a policy’s desirability based on how progressive it is, then why don’t they try to do as much as they can to cut this regressive and unpopular tax?

      

    Adam joined the Centre for Policy Studies as Head of Economic Research in January 2014. 

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