12 February 2009

Local Income Tax Halted in Scotland

I was delighted to see that the introduction of local income tax in Scotland has been dropped.

In contrast to the David Nutt ecstasy debacle, the big two of Labour and Tory backed the rational choice of rejecting local income tax, while the smaller parties tended to back the knee-jerk option of local income tax. Only the Greens appear to have backed the rational choice on both counts by opposing local income tax and backing David Nutt.

Removing the charge on holding domestic real estate and replacing it with a tax on income would have been a double whammy.

Abolishing council tax would have prompted a corresponding increase in property prices, due to housing immediately becoming cheaper to hold, meaning that first time buyers and renters would have seen little or no benefit, while giving a windfall gain to those who already have a decent level of property wealth. Adding an income tax on top of that would increase the burden on those with who are working their way up, while having less impact on those who have already accumulated wealth. Overall, the shift would have benefited those who gain wealth through speculation while penalising those who gain wealth through productive activity, which would have resulted in those who live in rented accommodation and work losing out most and those who own real estate and live off previously acquired wealth gaining most. I don't see how that is either fair (however you define fair) or economically sound.

Council tax is massively flawed and I believe it needs to be either drastically reformed or ideally replaced by a land value tax, but given a choice between council tax or local income tax, I'll back council tax every time.

No comments: