Bite the Bullet on Council Tax

Article excerpt

Conservatives would say that there are no such things as good taxes, and revolutionary socialists would oppose funding a bourgeois state. But those on the centre left should support taxation and take it seriously. It should be regarded not just as a means of collecting revenue, but as an instrument of social policy. As society changes, so should taxation, adapting to people's changing habits and the country's changing needs. Ministers' time would be better employed in constant reform of the tax system than on new schemes for schools and the NHS every few years. But politicians don't like to draw attention to taxes, and so prefer to leave them alone.

The left should look for taxes which hit the rich harder than the poor; which penalise goods and activities that ought to be discouraged; and which work fairly by being hard to evade. Most taxes will meet some of these criteria, but not others. Income tax in theory hits the rich harder, but in practice it is now insufficiently progressive, and wealthy people can easily evade it. It also penalises work and enterprise, which nobody should wish to discourage. VAT is largely regressive and, since it is collected through private business, easy to fiddle. Tobacco duty discourages the undesirable activity of smoking, but hits the poor hardest and is easily evaded by smuggling. Inheritance tax is unfair in its present form because it is levied on the deceased's estate and not on the windfall that each beneficiary receives.

A few taxes have hardly any downsides at all, provided (and it is a big proviso) that they can be implemented in the right way. Once the technology is set up, charging for road use--not just in city centres and on motorways but across the country--would certainly count as virtuous taxation: it will hit the rich, who travel more than the poor; it will penalise the causes of pollution and congestion; and, because you can't hide from a satellite, it will be hard to evade. Ministers are happy to ponder introducing it in 2014, by which time even Tony Blair may have shuffled off into retirement. They are less keen on what we have now: the almost equally virtuous petrol tax. Faced with rising prices for the product itself, and protests from the selfish and ignorant motoring lobby, they have announced that they will delay a 1.9p rise due in September.

In similar fashion, they hesitate over council tax. Property tax is the ideal local tax because there can be no question about where a house is located and you cannot spirit it offshore. …