Council tax for the rich

[karatekid]

Just read this article on council tax bills:

THE MANSIONS THAT CAN COST LESS THAN FAMILY HOMES

Picture a £136.4 million penthouse apartment in London’s Knightsbridge. The service fees alone are more than £3,000 a week and it’s no more than a five-minute walk to the famous Harrods department store.

Now consider a three-bedroom semi in rural Wiltshire, on the market for £335,000.

Its driveway can accommodate two cars and it boasts a modest garden. It may seem hard to believe, but the owner of the penthouse - Rinat Akhmetov, who happens to be Ukraine’s richest man - will pay £344 a year less in council tax (at £1,376) than a family moving to Wiltshire (who will pay £1,720).

Despite boasting some of the world’s most expensive homes, London boroughs including Westminster and Wandsworth impose some of the UK’s lowest council tax bills. No property in Westminster can be charged more than £1,376.28 a year.

Cliff Dalton, of the Chartered Institute of Public Finance and Accountancy, says: ‘Because the value of the housing market has soared and there hasn’t been a revaluation since 1991, the council tax system feels out of sync. ‘This is why you might find someone in central London living in a house worth £1 million but on a banding that seems quite modest.’

Westminster council will begin asking homeowners with properties worth £10 million or more if they want to make an additional, voluntary, council tax contribution.

Council tax rates for Borough of Kensington and Chelsea 2018/19

Council tax rates by band
Band* 2018/19
A £748.71
B £873.50
C £998.29
D £1,123.0
E £1,372.64


I pay more for my 2 up 2 down in burnley than a band E in Chelsea.

[SmudgetheClaret]

Mine is £218 a month but I'm more upset about those who don't pay it,either because they just don't or are pulling the wool to be exempt..

[dsr]

So what the article is saying is that the poorest people in Westminster pay the lowest Council Tax in the country because their taxes are in effect subsidised by the rich?

If they're trying to elicit sympathy for this family in Wiltshire with a two-car driveway and a £335,000 house, because they pay s midge more council tax than me, then I won't bite.

[Devils_Advocate]

DSR: the rich mans Robin Hood

[basil6345789]

I am a Minister in the Ecky Thump religion and have deemed our living room a place of worship. I pay no Council Tax.

[Hipper]

Council Tax is not about actual property values but relative ones in that area. If the property prices in the whole of Westminster have gone up in proportion then it doesn't matter for Council Tax calculations what each property is valued at. Councils require a certain amount of council tax income and this demand is then divided up accordingly.

The fact that in other council tax areas people pay more or less is irrelevant.

[Paul Waine]

[quote="karatekid"]Just read this article on council tax bills:

THE MANSIONS THAT CAN COST LESS THAN FAMILY HOMES [quote]

Hi kk, it's a poorly made argument. (1) Council taxes are charged by local councils - on top of the general tax payer funds they receive based on gov't formulas from national government. Together these funds go towards paying for "local" services (as defined by national gov't) (2) a lot more people live in London and there a lot more housing units that pay council tax; (3) there is much higher demand for housing in London than there is in Wiltshire and therefore house prices are much higher than elsewhere.

We could discuss the division between national government expenditure and local gov't expenditure. We could discuss how local expenditure is funded. Should it all be funded by locally raised levies or should some of it be based on national taxpaying funding? We could discuss population differences, age profiles, age related needs and should these be funded by locally raised levies or again, supported by national funding. Then we could compare the efficiencies of local government administrations units, which models are "low cost" and which are "high cost" and why the differences.

We could also discuss whether residential property is the best way of determining the "taxable unit" or whether other activities or assets should be the basis of local taxation.

If you are old enough and were responsible for paying the bills you will remember rates. Then you will remember Margaret Thatcher replacing the rates with the community charge where every adult in a local council's area paid the same amount (and also became known as the "poll tax"). The latter was replaced by Council tax.

If we believe in local democracy then whether we are tax based on rates, community charge or council tax there will always be differences between the rate of tax charged by some councils and the amount charged by others.

[dsr]

DSR: the rich mans Robin Hood

Not really. But the laternative is that councils in richer areas have to raise taxes they don't need to subsidise councils in poorer areas that want to spend money they haven't got.

I reckon that a shake-up of council tax is needed, but I don't know what to do about it. My first step would be for the government to take over pensions liabilities and all future pension benefits would stop. Council staff would have to organise their own pension benefits on the same basis as private sector workers. Council tax could fall by 20% or more overnight if this happened.

[Paul Waine]

Not really. But the laternative is that councils in richer areas have to raise taxes they don't need to subsidise councils in poorer areas that want to spend money they haven't got.

I reckon that a shake-up of council tax is needed, but I don't know what to do about it. My first step would be for the government to take over pensions liabilities and all future pension benefits would stop. Council staff would have to organise their own pension benefits on the same basis as private sector workers. Council tax could fall by 20% or more overnight if this happened.

Hi dsr, I'm not particularly knowledgeable, but don't the council pensions have some assets - even though these are a long way short of the council pension liabilities?

I'm in favour of all "Higher paid" staff in the public sector moving to direct contribution pension schemes. I'd start with MPs and government ministers and the Treasury civil servants. I'd also consider cutting the accrued unfunded pension benefits by 10% (plus a cap) in exactly the same way as the Pension Protection Fund caps any private sector pension funds where the sponsoring business has "gone bust." "Lower paid" staff I'd leave as they are, that's not the area where the deficits exist.

[dsr]

Hi dsr, I'm not particularly knowledgeable, but don't the council pensions have some assets - even though these are a long way short of the council pension liabilities?

I'm in favour of all "Higher paid" staff in the public sector moving to direct contribution pension schemes. I'd start with MPs and government ministers and the Treasury civil servants. I'd also consider cutting the accrued unfunded pension benefits by 10% (plus a cap) in exactly the same way as the Pension Protection Fund caps any private sector pension funds where the sponsoring business has "gone bust." "Lower paid" staff I'd leave as they are, that's not the area where the deficits exist.

Definitely MPs. It is an absolute scandal that MPs have written a special law that exempts them from the normal taxes on very high pensions. They above all should pay for their own pension like the rest of us, if only so they can get an idea of how it works.

I don't know about assets, but I googled and found articles that suggest that pension spending represents about 20% of the value of council tax raised. (Not 20% of council spending, of course, because they raise funds from other sources. Including central government funding, and expensive town centre parking designed to support out-of-town estates and internet shopping, and heavily penalising accidental users of bus lanes.)

[claretabroad]

I am a Minister in the Ecky Thump religion and have deemed our living room a place of worship. I pay no Council Tax.

Ecky Thump is a martial art not a religion.

[Imploding Turtle]

A land value tax makes much more sense and go a long way to solve the problems of council tax, but that's a Labour idea and so that makes it communist.

[IanMcL]

We should make the Normans pay.

They are all still in place and own most of the country.

[Caballo]

A land value tax makes much more sense and go a long way to solve the problems of council tax, but that's a Labour idea and so that makes it communist.

Not sure it would change anything as it would still be relative to the local area as it's a 'local' tax.

[Foulthrow]

We should make the Normans pay.

They are all still in place and own most of the country.

I'm not called Norman, therefore I'm fully in support of this idea.

[Paul Waine]

A land value tax makes much more sense and go a long way to solve the problems of council tax, but that's a Labour idea and so that makes it communist.

Not sure it would change anything as it would still be relative to the local area as it's a 'local' tax.

I'm not a communist - and most of Labour's ideas on taxation are "wrong headed" imho. Much too much of the "we will take from someone else...."

However, we could abolish stamp duty on property purchases - and replace it with a "land value tax" which included both a national taxation element and local tax share.

Stamp duty is "killing the economy." People need to move to where the jobs are. The country doesn't want people to be stuck in the same place and limiting their job moves to their local area alone. People that move don't need a large tax burden when they buy a new property. Equally, because stamp duty is so high - certainly on property prices in London/S.East - it makes it more economic for property owners to extend and add living space onto existing property, rather than move "up the ladder." This has the result of making it even harder for the, generally, young to get on to the housing ladder - because the bottom rung has been pulled upwards ("starter home" with an extension is no longer a starter home). High stamp duty is similarly a block on older property owners downsizing. Who wants to pay stamp duty when you are aiming to downsize?

Of course, abolish stamp duty and you'd think property prices would increase by the equivalent amount. Not, if every property owner has to pay an annual "land value tax." If there's an annual tax to be paid, house prices will reflect it - prices will fall. Those who choose not to move will be sharing in the taxation burden that currently falls only on those that are buying houses, especially in London/S.East.

It should also help encourage the efficient use of land banks. Once planning permission is obtained, land value tax would apply according to the increased land value - so, every incentive for the builders to build quickly and sell the homes that have been permissioned.

Where Labour falls down is they don't say "Let's get rid of stamp duty."

"Killing the economy" is, of course, a bit strong. However, it puts "grit" in the country's economic life and we have lower wages and lower GDP as a result.