Wednesday, April 8, 2009

Council tax up 108 percent since 1997

If only incomes grew as fast as the council tax. Since 1997, the average payment in England it is up 108 percent. For fiscal year 2009-10, the average payment is projected to be £1,175; up 2.6 percent from the previous year.

13 comments:

  1. Ho hum.

    Apart from being regressive to property values, Council Tax ain't such a bad tax, you know.

    If you bought an average home in 1995, how much council tax have you paid in the last 12 years, £8,000 maybe?

    And how much has your property increased in value (even after a year and a half of crash), £80,000 maybe?

    That's hardly a swingeing tax on entirely unearned windfall income, is it? Not when people are paying half their gross incomes in income tax, national insurance and VAT.

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  2. The graph makes it clear that the big jumps happened in 2002-3 and 2003-4.

    I'd bet good money that this has a lot to do with those being the years when the NHS offloaded a lot of responsibility for older people from hospitals onto Council funded care homes, and the Government forced Councils to increase the amount of cash given directly to schools, rather than making them compete for scarce funds with all the other local services.

    It annoys me when people call council tax a stealth tax, it's the least stealthy tax there is, since it arrives as a bill in the post - VAT is a stealth tax. The Government taking money away from Councils to fund other spending, thus making it look like it is the Council putting tax up when they are in fact running to stand still is, however, rather stealthy.

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  3. MW - what does council tax have to do with property value if our wages aren't rising at the same rate ? For the greater part of your life your equity may as well be trapped under perma frost.

    What business of the council is it to take from our personal profits anyway ? Central Govt does that. The council's job is simply to provide services and value for money.

    By your rationale I shall look forward to my council tax bills when they come down comensurate falls in the value of my property too.

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  4. EK, you overlook that the state shouldn't really be taxing incomes at all.

    The only reason that the land on which houses are built has any value at all is because of the state regulating, directing and restricting what society in general does. If they shut down the core functions of the state (defence, police, legal system, land registry, refuse collection, road maintenance) what do you think land in the UK would be worth?

    So why shouldn't land-owners pay towards the value of those services?

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  5. MW, and you overlook the fact that homes are principally for living in - not speculative activity.

    Core functions of state can be extremely overactive - as in the former Soviet Block - evidently it didn't add much to the wealth of the people though.

    Setting aside imperialism, what adds to the value of housing is the ability of the nation in which they stand to add value to raw materials or add value to people themselves and to export goods and services at profit to generate wealth.

    Government is notoriously bad at doing this. In fact we've never had more government than we have now at the very moment we face bust; I would go so far to say that spending by government (central and local) is the main reasons WHY we face bust.

    If council tax is to be given gratefully and commensurate with gains in house prices then it is only right that council tax should be reduced when there are losses. Performance related - now there's a good idea.

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  6. If council tax is to be given gratefully and commensurate with gains in house prices then it is only right that council tax should be reduced when there are losses. Performance related - now there's a good idea.

    now there's a good idea called the Land Value Tax.

    IF Government reduces land values, it gets LESS.

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  7. EK, homes are for living in, that's the whole point.

    As to 'core functions', this is a very short list (police, defence, legal system, immigration control, refuse collection, road maintentance, lighthouses etc). Anything above that is not a core function. ID cards and NHS and so on are not 'core functions', and the government should not be doing them. The 'core functions' cost somewhere in the region of ten per cent of GDP.

    "what adds to the value of housing is the ability of the nation in which they stand to add value to raw materials or add value to people themselves and to export goods and services at profit to generate wealth."

    Exactly, spot on, so to the extent that we have tax to pay for core functions, who should pay the tax the people who create that wealth through working and investing, or the people with the unearned windfall gain?

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  8. Who decides what is 'earned' and 'unearned'. It is no business of the state to judge.

    When there are losses in property will government be compensating householders for their part in it ? No. Of course not.

    I am also bothered that - rather like estate agents' fees - council tax has been ramped up on a percentage basis for no logical reason other than the people will bite their lips and pay it. And on the back of this we now have council executives grossing £200k pa whilst services deteriorate.

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  9. EK, "Who decides what is 'earned' and 'unearned'. It is no business of the state to judge."

    OK, there might be grey areas, but IMHO getting out of bed to go and work five or six days a week, or investing you savings in what you hope will be a profitable, productive business is "earned" (and should be taxed as lightly as possible) and simply owning land and watching it increasing (or indeed decreasing) in value because of what the State does (local core functions, planning restrictions, artificially low interest rates) or because of overall improvements in productivity economy etc) is "unearned".

    Building, owning and improving buildings on your land is, for these purposes "earned" income.

    There's no political axe being ground here - for the most part, most households have one or two wage earners, a bit of investment income and own their own home. So it's just A LOT LESS tax on "earned" income and A BIT MORE tax on "unearned income".

    As AC1 points out, proper land value tax applies purely to location value - when these go up (either because State is doing its job properly, e.g. cutting crime in an area, OR because of increases in business activity in an area) then LVT goes up, and when these go down (because the State allows a gypsy camp to set up, or because local businesses fail) then land values are "unearned losses" and the tax would go down again.

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  10. .. and Council 'CEOs' paying themselves £200k is not a core function, it does not add value to anything and so would not be reflected in higher LVT bills.

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  11. Wadsworth, you bloody socialist! Surely there's no need for state provision of lighthouses?

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  12. I've found a reference. Bless Google.
    http://en.wikipedia.org/wiki/The_Lighthouse_in_Economics

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  13. MW,

    apropos of Alice's original post: what we have here is a graph showing council tax rising a lot faster than income.

    You seem to be saying that this is justified because householders have enjoyed an 'unearned' rise in equity - you also imply that this rise in equity is thanks to the council.

    Well I have a couple of questions:

    - Does the taxpayer living in rented or council accommodation have anything to show for their increased tax bills ?

    - Does the newby buyer who has nothing but debt to show for his purchase have anything to show for these ridiculous bills ?

    - isn't the whole reason of this blog to argue that the housing bubble has been built on funny money ?

    In fact there is now broad concensus that the housing market was hyped beyond realistic prices by exotic mortgage products because of government deregulation. The rise in the value of my house is with no thanks to the shoddy services I recieve from the council which are now far inferior to when I used to pay them far less.

    Gordon Brown implores us that the property crash and the ensuing bankruptcy of this country is not his fault - "It wasn' nay me ! It wasn' nay me !" And that the overshoot of the property market was the fault of reckless bankers.

    So there we have it.

    Even the man himself says the property boom was false and has nothing to do with him.

    I think the police have got their concerns about public disorder a bit mixed up. They're banking on a G20 style revolt in the City.

    I think a more realistic forecast is - if this recession turns to depression, which I think it will - that town halls up and down the land will be burned to the ground.

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