A committee of MPs believes a local income tax, paid alongside council tax, could help give more power to local authorities.
An extra local income tax could help move power towards local government and away from Westminster, according to an influential MPs' group.
The communities and local government committee has suggested that the tax, which would be paid along with council tax, would help local authorities boost their remit and achieve independence from central government.
Committee chair Dr Phyllis Starkey said: "We are still a long way from an equitable and healthy balance of power between central and local government in this country. Central government must take radical steps to tilt the balance of power towards localities and local government must become more ambitious."
The proposals were laid out in a report, The Balance of Power: Central and Local Government. Local government minister John Healey opposed the proposals.
"We have no plans to change the current structure of council tax or to introduce a local income tax," he said. "To do so would create significant restructuring costs and place new burdens on businesses in these tough economic times."
Mr Healey added that the government has already loosened financial constraints on councils though a variety of means, including "billions of pounds of grants with no spending strings attached".
The report also suggested ending the capping of council tax and putting business rates back in the control of councils.
