3 ms·

I'm confused. Are Birmingham taxes levied in absolute units of currency, not as a % of income? Because if it's a % of income, then inflation is irrelevant, no?

nvarsj 3y ago
It's a fixed amount. And hilariously outdated - it's based on property valuation in 1991. I pay more council tax on my modest home than some mega mansions in the area. The other silly thing about it is the tenant pays, not the owner.
- benmmurphy 3y ago
  Tax incidence likely means it doesn’t matter who the nominal payer of the tax is. In the present situation even though the renter pays 100% nominally they might not be paying 100% of the incidence and vice versa if the nominal tax fell on the owner.
deleted 3y ago
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MattPalmer1086 3y ago
Correct, local tax is not an income tax. You are charged a fixed amount based on how much the property you live in was worth in the 1990s. This is done in bands, not as a direct percentage of the property value.
pmyteh 3y ago
Yes. British local taxation is banded (and deliberately regressive WRT property values) rather than proportional. It's a compromise between the old Rates (like a US millage) and the poll tax which Thatcher disastrously tried to introduce which had no property value component at all. Further, rates are arbitrarily constrained by central government on a value for money and/or starve the beast basis. Councils are in theory free to raise taxes less than this, but in practice the maximum increase is way less than the annual increase in what it actually costs councils to provide services[0]. Coupled with an almost complete removal of government grants (which used to represent ~35% of council income) councils have been cutting everything that moves and still circling the drain. This has been going on since 2008. Every council issuing a Section 114 notice has its own local reasons for getting to this point now, but frankly the whole sector has been buggered. TLDR: proposition 13, but imposed by central government instead of the voters, for all possible sources of income except user fees rather than just property taxes, and with no reduction in legal responsibilities to discharge. [0]: The most expensive local government services are intrinsically staff heavy and so suffer from Baumol's Cost Disease. Teaching class sizes are basically limited to 30, for example, and require one qualified teacher each. Child protection is the other biggest expense.

nvarsj 3y ago

It's a fixed amount. And hilariously outdated - it's based on property valuation in 1991. I pay more council tax on my modest home than some mega mansions in the area. The other silly thing about it is the tenant pays, not the owner.

benmmurphy 3y ago
Tax incidence likely means it doesn’t matter who the nominal payer of the tax is. In the present situation even though the renter pays 100% nominally they might not be paying 100% of the incidence and vice versa if the nominal tax fell on the owner.

deleted 3y ago

[deleted]

MattPalmer1086 3y ago

Correct, local tax is not an income tax. You are charged a fixed amount based on how much the property you live in was worth in the 1990s. This is done in bands, not as a direct percentage of the property value.

pmyteh 3y ago

Yes. British local taxation is banded (and deliberately regressive WRT property values) rather than proportional. It's a compromise between the old Rates (like a US millage) and the poll tax which Thatcher disastrously tried to introduce which had no property value component at all. Further, rates are arbitrarily constrained by central government on a value for money and/or starve the beast basis. Councils are in theory free to raise taxes less than this, but in practice the maximum increase is way less than the annual increase in what it actually costs councils to provide services[0]. Coupled with an almost complete removal of government grants (which used to represent ~35% of council income) councils have been cutting everything that moves and still circling the drain. This has been going on since 2008. Every council issuing a Section 114 notice has its own local reasons for getting to this point now, but frankly the whole sector has been buggered. TLDR: proposition 13, but imposed by central government instead of the voters, for all possible sources of income except user fees rather than just property taxes, and with no reduction in legal responsibilities to discharge. [0]: The most expensive local government services are intrinsically staff heavy and so suffer from Baumol's Cost Disease. Teaching class sizes are basically limited to 30, for example, and require one qualified teacher each. Child protection is the other biggest expense.