Detroit – the dangers of local taxation

I have long pointed out that the current talk of rebalancing taxation by increasing the amount of tax which is raised by local government, and reducing that which is provided to them via central government, is dangerous talk with very large risks and implications. So much so that I cannot understand why so many local politicians, and their staff and advisors, are supporting such proposals

So, it is good to see, at last, one of the big consultants pointing out the dangers which I have been talking about.

Link can be found here:  http://www.theguardian.com/local-government-network/2013/jul/26/detroit-bankrupt-uk-councils-debt?CMP=&et_cid=43502&et_rid=1319834&Linkid=powers+are+in+place+to+prevent+this+scenario+from+happening+in+the+UK&commentpage=1

In the USA, which advocates of the taxation rebalancing usually refer to,  local taxes at 51% makes up the largest source of income for local authorities.  In the UK council tax typically represent 10%-20% of most UK Councils’ revenue income.  I have always argued that there are very few (a handful) of local authority areas in the UK which have robust and wealthy enough local economies to survive without central government financial support.

 

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