Comments on: Local income tax: just because the SNP are proposing it doesn’t make it wrong

By: Is England softening on Local Income Tax? « View from North Britain

Is England softening on Local Income Tax? « View from North Britain — Mon, 08 Sep 2008 12:40:44 +0000

[...] now even Labour bloggers are starting to argue in [...]

By: Jack

Jack — Sat, 06 Sep 2008 13:50:02 +0000

It's not really a 'local income tax' at all. It's a national income tax (I am taking the SNP at their word that Scotland is a nation). This tax will be levied centrally and the money raised will not stay in the areas it is raised from. A real local income tax would be levied by local councils, not by Edinburgh. Simon Jenkins has a good critique on why this is fiscal centralisation dressed up as localism. He even argues it could be Alex Salmond's poll tax moment. We'll see. The bigger question is surely about the balance of taxation among the three broad types: taxes on work (e.g. income tax), taxes on property ownership (e.g. council tax) and taxes on consumption (e.g. VAT). In the UK we are heavily tilted towards taxing work as opposed to taxing land ownership and taxing consumption. The lack of serious taxation on property ownership explains a good amount of the crazy UK property bubble. I've argued for land taxation more fully elsewhere. Taxing consumption has pros and cons, but is most effective when (1) not regressive, e.g. taxing essentials like food and clothing and (2) targets consumption where there are signficant externalities, e.g. taxing gas-guzzling vehicles that contribute disproportionately to climate change. My preference would be for a lot less tax on work and a lot more tax on property ownership and consumption, particularly consumption that has negative social impacts that are not part of the price paid by the consumer.

By: john b

john b — Thu, 04 Sep 2008 12:18:58 +0000

“Why not instead raise the same cash from income tax instead?”

Because it’s entirely reasonable and right that some of the tax incidence should fall on unearned wealth, rather than solely on earned income. If we had CGT on houses, then council tax would indeed be unfair.

By: Q

Wed, 03 Sep 2008 23:02:19 +0000

Pretty fair all round Jon. You commented that Council Tax was ‘twisted’ because 75% of the funding for poor burghs was still distributed from the center. I would wait for a bit more of the LIT detail, before breathing a sigh of relief. Central (Scottish) government will probably still retain a premium slice to hand out. For instance, the tax base, per capita, of somewhere like Glasgow, must be a lot lower than neighboring authorities like East Dunbs and East Ren, but the City needs to spend more per head.

By: Jon

Jon — Wed, 03 Sep 2008 20:58:32 +0000

First comment – fine. Second one – not sure. I think there’s so much smoke and mirrors with how Council Tax payments are set up and few politicians ever come clean about all of it – whichever side of the debate you are on.

Essentially it should be a matter of principle – if a council does it, the council should raise the money for it. Same for the Scottish Executive and for Westminster. It’s fiscal federalism, and we’re too far away from it in the UK!

By: Miller 2.0

Miller 2.0 — Wed, 03 Sep 2008 20:31:35 +0000

Ph, and on the two bits of CJs staement not sitting together, it’s largely for the reasons I explain in my post; it will damage services in areas where people are too poor to pay, and damage admittedly pampered pockets elsewhere.

If anywhere needs a local income tax (and I remain to be convinced), It’s England. My feeling is that it would hit Scotland a lot harder, due to the level of catch-up its economy is currently playing with that south of the border…

By: Miller 2.0

Miller 2.0 — Wed, 03 Sep 2008 20:28:29 +0000

You’re right, in principle, this is not a bad idea. And Council Tax is rubbish.

But the effect in reality is also something to consider. Plus the fact that the SNP are using the 3% Scottish Parliament margin for this.

Surely there is a way of doing these things which is more progressive than either this or Council Tax? What about a land value tax, for instance?