Rates reflect Ethics

There is no question about who would financially benefit most from a reduction in rates—it would be the high-wealth people who own the most valuable properties. The rest would pay with a reduction of services. Would that be fair?

It might seem difficult to argue that there should be a reduction in rates that would overwhelmingly benefit the wealthy while simultaneously depriving poorer residents of benefits.

Yet that is exactly what some people are advocating.

We are having leaflets poked in our letter boxes and are seeing posts on social media that claim there is something unfair about the fact that some people pay high rates.

But is the Port Phillip rating system therefore unfair?

Paying rates is a contribution to the community. It is not a matter of paying only to get returns (services) for you individually but is to help provide a wide range of services for everyone who needs them.  In Port Phillip rates underwrite all our social welfare programs. That is, it is based in an ethic of equality, generosity, and empathy.

But those who advocate lower rates reserve their sympathy for those like themselves who own high-value real estate.

Of course, they hide this self-interest behind a pretence of concern for others.

The example is often used of someone whose home is very valuable and therefore attracts a high rate, but whose income is limited—'property rich and income poor' as the familiar saying has it.

Can such examples justify a general reduction of rates?

Surely not.

Many people in Port Phillip are experiencing financial stress due to the deep recession flowing from the pandemic. Many small businesses and local traders are facing a very uncertain future. Our arts communities have been devastated. Many people have been left behind by the federal government, including casual workers, international students, and temporary visa holders.

Progressive Port Phillip argues that further rate relief should be provided for people doing it tough. This is far preferable to an across the board rate freeze, which would overwhelmingly benefit people who own the most expensive properties.

Port Phillip is one of the few councils in Victoria that provides rate relief for genuine cases of hardship over and above the standard Victorian Government scheme. It is well placed to extend that relief to people hard hit by the recession.

Rates are effectively a flat tax, 0.037282% of the Net Annual Value applying equally to a 1970s flat in East St Kilda as to a lovely Italianate mansion in Albert Park. Proportionality is built into the calculation —you pay according to the value of your property. The very wealthy pay the same proportion of the value of their house as everybody else. If it were a progressive tax the wealthiest property owners would pay much more.

Rates cannot be considered as a stand-alone issue. If you reduce the rates you reduce the income Council receives and this inevitably leads to a reduction of services, which is the real goal of the proponents of lower rates. They are running an ideological campaign to shrink the role of government generally – at a time when we need strong community services more than ever. It has nothing to do with the particular situation in Port Phillip.

Nor is there anything anomalous or capricious about the Port Phillip rate.

All properties are valued each year by the Valuer General. The Victorian Essential Services Commission advises the Minister for Local Government in setting a rate cap, which is the maximum amount by which a Council can increase its general rates. Economic factors like the Consumer Price Index and wage movements are considered in setting the rate cap; since it commenced in 2015, it has varied between 2% and 2.5% annually. The Council then determines the amount required from its rates revenue in the context of its other income sources, and, based on the overall total of the property valuations, it sets an amount in the dollar which when applied uniformly to the more than 60,000 individual properties will generate the necessary income. In 2019/20 the general rate was $0.037282 cents in the dollar, applied to the Net Annual Value of every property in Port Phillip.

Given the flat rate, there is no question about who would financially benefit most from a reduction in rates—it would overwhelmingly be the high-wealth people who own the most valuable properties. The rest would pay with a reduction of services.

Would that be fair?