Essay Plans

Argue the case for a replacement of the rating system with poll tax/community tax.

SYNOPSIS:

POINTS:

  1. Rates are a form of taxation therefore the critical aims are the same as there would be for a tax - disincentives, administrative costs, inequitable etc. The key to any essay about taxation is to remember Smith's cannons plus the two additions; economy, flexibility, equity, certainty, convenience, efficiency.

  2. Rates are a direct tax on capital (i.e. the value of property) calculated on the imputed market rent paid by a hypothetical tenant.

  3. Rates may be regressive of progressive depending on the occupants - and herein lies the problem. An old person living alone, on a pension BUT in a large house may pay more rates than several income earners living in the same house.

  4. There is also the problem of efficiency of councils. As a very general rule, the higher the rates, the more inefficient the council. What makes inefficiency is also a political question (and therefore outside the scope of this question).

  5. Rates depend on two factors:

    • Rateable value of the property
    • Percentage of the rateable value that is levied by the local authority

    Thus, if a person builds a garage and takes his/her car off the road (social benefit as it eases congestion) the value of the house will rise and the rates also. Thus a social benefit is penalised.

  6. In inner-city areas rates may be high as councils attempt to mend social and material decay. Thus poor people may pay a higher proportion of their income in rates than the rich living in a higher or lower rates area.

  7. Many of those who vote in elections (local) are not rate payers; many who receive direct benefits (eg schooling) are not ratepayers. A large proportion of the total rates collected is from local business (who cannot vote).

  8. The replacement poll tax has to be measured against the following criteria:

    • Is it practical?
    • Is it more equitable?
    • Is it regressive/progressive/proportional?
    • Are the administrative costs prohibitive?
    • How does it affect the rest of the tax system?
    • Is it suitable for all tiers of local government?

    (The above is based on the 1981 Green Paper on local government under the Conservatives - the Green Paper came out AGAINST a poll tax.)

  9. On a flippant point - to avoid the poll tax you need to say off the electoral register; those most likely to avoid will be lower income levels; if you stay off the register you cannot vote; lower income tend to vote Labour; hey presto!! 20 years of Conservative Government!!

    This final type of point should only be included in essays with great care - there is nothing wrong with letting the examiner know you have original humour -within certain boundaries!!!

    Other Points

  10. Will the poll tax mean a reduction in rents (those that originally included rates?) If so the supply of affordable accommodation will increase as from the landlord's point of view the rent received will not change.

  11. If net income from poll tax exceeds rates (notwithstanding administration costs) will other taxes be reduced (or will there be an increase in public expenditure?)

  12. Supply and demand analysis COULD be used showing rates as a tax on rent and discussion concerning incidence - see Economic Review May 1988 page 20.
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