In response to the Coronavirus pandemic, some local councils have announced, or are planning, an across-the-board rate freeze.
A rate freeze is a bad idea for these reasons:
Council rates are a “wealth tax”, not an income tax. Rates are calculated using property values. A general rate freeze gives most of the benefit to the wealthiest property owners.
Victorian councils are already subject to a maximum small percentage increase in total rates collected. Due to rate capping, a rate freeze lowers rate-raising capacity not just for the current year, but for future years. This will reduce local government services permanently.
A better idea is to target relief, here are some suggestions:
Relief for the most affected in the residential community. Pensioners that are asset rich and income poor. Unemployed property owners. Easier to access financial hardship rate deferments. Increased material aid (food and care) packages.
Increased support for the most affected in the business community. Refund street trading permit charges. Rate rebates for retail traders.
When the impacts of the pandemic were first known, many councils responded quickly with broad-brush relief. In order for the limited amount of relief to be most effectively and fairly applied, relief should now be as targeted as possible.
While a rates freeze such as that announced by the City of Melbourne is politically popular, most of the benefit goes to the wealthy, with any resulting debt burden borne by the whole community.