Destroying Local Leviathans and Designing Landscapes of Liberty? Public Choice Theory and the Poll Tax

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This paper examines the UK poll tax or 'Community Charge' proposals and legislation from a public choice perspective. It argues that there is more logic behind the tax proposals than many credit, and that public choice theory provides the implicit philosophy or ideology behind the proposals. The paper reviews the main concepts in public choice theory, and their application to local government, stressing the ways in which local social and economic landscapes can generate 'fiscal exploitation'. It then applies these ideas to the UK context, arguing that the existing rating system allows major mismatches between local voters, taxpayers and expenditure beneficiaries, so generating an excessively large local public sector and fiscal exploitation. It argues that the poll tax will reduce this mismatch and provide a more appropriate basis for local taxation. The poll tax, whose logic is based on local government providing public goods from which all benefit equally, is not the ideal tax for financing many existing local services, but there is no such ideal tax. Public choice theory also provides a framework for examining how local government provision may develop with (a) more emphasis on private provision to satisfy individual preferences, and (b) more emphasis on redistribution to individuals instead of to local government areas. A slimmed down local government, providing genuine local public goods, would be appropriately financed by a poll tax.