Steve Baron: Present rating system causes inequalities

Steve Baron

WHANGANUI District Council, to its credit, has continually strived (under current legislation) to ensure fairness in our rating structure, although many ratepayers would probably disagree with that, for one reason or another.

Unfortunately, tinkering with the current system does not mean rating structures are all that fair or just. Some might even say what our council is doing is comparable to re-arranging the deck chairs on the Titanic.

Given the continual complaints about council rates on issues such as affordability and charges for the proportionality of the services used, perhaps the time has come for central government to review how local councils are funded. Perhaps it is time for a whole new approach to the rating system that is far more judicious.

Although everyone dreads the next rates account, some dread it more than others because they pay far more than the average ratepayer in Whanganui district.

Take, for example, a commercial property owner, a farmer, a property owner with a bigger section than average (like those along Karaka St, Castlecliff) or an elderly person who has lived in the family home for decades and now finds it is an extremely valuable asset because of its location. These people pay a disproportionately higher amount of rates than others, but often use far fewer services and earn less income.

Rates paid by the farming community have risen more quickly than those in the city. The average rate charge for farms went up by 8.4 per cent in 2015-16 because council decided to "collect a smaller amount of rates on a per property basis and more rates based on land value".

Commercial property owners have not fared much better with big increases as well.

But here is the difference - having a larger piece of land, a commercial property or a valuable family home does not mean that you use any more council services than anyone else in Whanganui - or that you can afford it any more easily either.

My farming friend Dave and his wife use fewer services than my friend John, his wife, and their four grown-up kids living in central Whanganui and they earn far less, too. Consider Gran, who has lived alone in her valuable St John's Hill home for many years, having purchased the property cheaply more than 30 years ago, yet she exists off national superannuation and rarely ventures out to use all the services which John and his family consume.

While Gran might get a rates rebate, it still does not seem fair.

The only equitable way to fund local services is through income taxation.

To start with, this spreads the cost of services over a bigger range of people compared to the range at present.

Using income taxation also means that those who are working and can afford it the most, are the people who pay. It would mean that those who are gainfully employed but do not own a property, and therefore are contributing nothing at present, would start paying for the services we all use.

For example, working adults living with their parents, or a group of people sharing a flat would have to contribute.

The present rating system is a regressive tax because it is not linked to the income of the ratepayer and so is inherently unfair.

- Steve Baron is a Whanganui-based political commentator, author and founder of Better Democracy NZ, and holds degrees in economics and political science. He is standing for Whanganui District Council in October - feedback to: steve@stevebaron.co.nz