Reform of Council Tax and the abolition of Stamp Duty have been much talked about. Council Tax is not only disliked, it is arguably the most regressive tax in the UK. The current system where a terrace house in Burnley pays more council tax than a mansion in Kensington is indefensible. The P2030 programme of Universal Services, which drive down the cost of living, provides the perfect opportunity to actually do what everyone has been talking about for so long.
Reform of Council Tax has been blocked by the same distortions that make the tax inequitable: reform would have a disproportionate effect on a politically important interest group: homeowners. Sequencing property tax reform with services that reduce the cost of living opens up the political space to make the needed reforms without disadvantaging homeowners. Ramping up Universal Services in advance, combined with protections designed into the new Property Tax, remove the barriers to reform.
The P2030 programme phases in a new Property Tax, at 1% of the value of the property, over three years, while Council Tax and Stamp Duty are phased out over the same time frame. Social housing is excluded, and provisions are made that allow owners to defer their tax liability until the property transfers. No one will have to move out just to pay their Property Tax.
Owner-occupiers who have recently paid Stamp Duty pay no Property Tax at all while the new tax phases in, so no household meets both taxes at once.
National v Local
The Property Tax is a national tax, levied at a consistent rate across the country. The revenues are allocated back to local governments on a per-person basis, with weightings for rurality, age, and deprivation. While this is a change from Council Tax, which is raised and spent locally, the per-person allocation removes much of the discretionary central control that the current system incorporates in other local funding. Only about a third of local government funding today comes from Council Tax, with the rest allocated through Byzantine formulas that accumulated over decades of tinkering.
The P2030 Community Housing budget (£10 billion) is reserved from Property Tax revenues before distribution to local governments, and allocated based on applications submitted by local governments for specific projects.