In response to the Coronavirus pandemic, some local councils have introduced across-the-board rate freezes.
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. To quote a council CFO, six out of seven ratepayers are not negatively affected by COVID. A general rate freeze gives a benefit to the maximum number of voters, but most of the relief dollars go to the wealthiest landowners.
Due to rate capping, Victorian councils are already subject to a maximum small percentage increase in total rates collected. 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, and the prospects of the impacts of COVID dragging on for many years, relief should now be targeted to those most in need.
While a rate 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.
I have experienced no loss of income, as I can do my job working from home. Due to COVID restrictions, I have had less opportunity for incidental expenditure and as a result, my bank balance increased. So I don’t deserve rate relief. I would prefer the genuinely needy receive relief, support, and council services, rather than those with the greatest landholdings.
With any “tax”, a small proportion will be adversely impacted, for example, pensioners that are asset rich and income poor. For this reason, most councils have a financial hardship policy that allows for those who can demonstrate financial hardship to defer their rates payment to after the asset is sold.