Walk around our towns and cities, looking at some of the oldest buildings, and you can see the scars left by taxation. The bricked-up windows are testament to the desire to avoid the seventeenth- and eighteenth-century levy on glass as a luxury item.

It was the Poor Law of 1579 that set parish rates as the main tax, decreed according to individuals' "means and subsistence". As recently as last November, an attempt to come to terms with the centuries-old issue of who should pay what, and how, was strangled at birth. The Local Government Finance Review Committee, under Sir Peter Burt, recommended the replacement of the council tax with an annual levy based on the value of a property. But it was rubbished by virtually all politicians before it was even published. The Local Property Tax (LPT) would have been set at approaching 1% of the value of homes, which could have hit wealthier middle-class voters. First Minister Jack McConnell announced that he would not give the idea "the time of day".

Professor Richard Kerley, of Queen Margaret University in Edinburgh, describes how the Burt report was discredited as "shameful", but pointed out that its fate was not dissimilar to that of the Lyons report south of the border last month. It was all but ignored because its release was timed to clash with Gordon Brown's last Budget. When it comes to local taxation - how to pay for cleaning our streets or maintaining our libraries and parks - it seems politicians get jumpy.

"There are two issues about local taxation," says Kerley. "One is that it is highly technical and complex to change systems. The other is political - who gains and who loses. It is an iron rule of taxation that if 70% gain from a change they will simply keep quiet, while the 30% who end up worse off will kick up hell."

In parts of Glasgow, Edinburgh and Aberdeen, relatively modest homes can be worth upwards of £300,000. That would have meant an annual LPT bill of almost £3000. The Scottish average council tax bill at present is less than £1000 and the banding system squeezes out big variations. So it is not difficult to see why politicians fear the kind of backlash that could be sparked among the 35% who would pay more under Sir Peter's plans, especially since the committee did not envisage exemptions for pensioners, favouring instead payments deferred until after death, when they would come out of the estate.

Kerley says: "There is a huge problem over how to create streams of local taxation in a state such as Britain, where people across the country have expectations of broadly similar levels of service provision for the same levels of taxation."

He points out that in the US, for example, people expect great variations between states even on major issues such as the death penalty, but in Britain a large degree of homogeneity is expected. That leads to fiscal transfers between better-off areas to subsidise less wealthy parts of the country with greater social problems but perhaps a lower tax base.

"The other problem is that we are still torn between the local and the national," he adds. "The conundrum is that if we find a method of taxation that is low in cost to implement, simple and related to the ability to pay, it tends simply to lead us back to national income tax, and that reinforces the dependency of local government, giving less responsibility and forcing them always to come back asking for more."

Getting the balance right between local and national funding and ensuring that the tax involved is seen as fair has been at the heart of endless reviews, going back to Goschen in 1870, Allen in 1961 and Layfield in 1976, which suggested a local income tax as a supplement to rates to bring both fairness and a stronger measure of local control of finances.

But, a decade later, the Thatcher revolution brought a 1986 green paper called Paying for Local Government. It led to the poll tax in Scotland in 1989, a year ahead of its introduction in England. Apart from the issue of a manual worker being asked to pay the same as a millionaire, there was also the sheer bureaucracy involved in moving from a household tax to a tax on individuals at a time of increasing mobility. People entreated to "get on their bikes" were hard to keep track of.

The Burt report states: "The community charge poll tax was very unpopular. It was expensive and difficult to administer. Collection costs rose from £14m under rates in 1988-89 to £43.5m by 1990-91. By January 1990, 421,400 cases of non-payment were being pursued, leading the Accounts Commission to describe the reform as the single greatest administrative upheaval' local government had faced since 1975. The implementation of the new tax system resulted in spending growth rather than the anticipated expenditure reductions."

When the poll tax was scrapped in favour of the council tax in 1993, collection rates rose and complaints halved, with most of these concerned about the upper banding limit and the extent of the 25% discount for single-person households. But while the sense of injustice about the poll tax had gone, little had been done about the imbalance in financial parity which saw councils raising only 20% of the money they spent, producing tension that Sir Peter describes as "a corrosive argument about the relationship between central and local government".

The Burt Committee examined this and concluded that the balance of funding between local and central sources was of little importance. What they did find was that attempts to make the council tax more progressive by rebanding, as currently proposed by Labour, would not work and the tax should be scrapped. But they also looked at local income tax as proposed by the SNP and Liberal Democrats and rejected that, too. Wealth as well as income should be taxed and tax on investment income would be "extremely complex and expensive".

Perhaps the single key phrase in Burt was that the committee was "satisfied that property is a reasonable proxy for wealth" and that "property taxes can be seen to be fair' and progressive because there is a correlation between property values and ability to pay". This, coupled with the rejection of the current system and an income- tax-based alternative, led the committee to come up with the Local Property Tax. Although this would have involved scrapping the existing council tax, they envisaged no difficulty with retaining the existing benefits.

But would the LPT amount virtually to a return to the rates, but based on sale value rather than notional rental value? Many experts suspect that when the Thatcher government jettisoned the whole system of domestic rates, some useful elements were lost.

As Kerley puts it: "The rating system had a lot to recommend it. At least rates had a progressive element, provided you believe in taxing wealth on more than just the one element of earned income."

One thing is clear. The rating system lasted in some form for centuries, while its successors have been relatively short-lived. Don't expect a return to taxing windows or hearths, but, whatever happens after May, expect the issue of local taxation to be visited again sooner rather than later.

How can they say I use more water than a house with five people?'

The council tax takes away half of Janet Black's pension every month, but, for every solution to her problem, there would be difficulties that sum up the complexities of local taxation.

She and her late husband were civil servants when they moved into their four-bedroom home in Motherwell in 1962, with two children and another on the way. Now Janet, 76, a widow for the past 10 years, lives in the house with her unmarried daughter, Alexandra, a teacher.

"It's a nice home and I don't want to move," she says. "I don't get the reduction in the council tax I would get if I was living alone, so I am paying the full whack and it's a Band F house. This month I will pay out £215 in council tax.

"That takes away half my pension right away. It's a big chunk. I do get help from my daughter but I don't like asking for more because she needs to save, too."

If there is a change in government at Holyrood and a switch to local income tax, Janet will clearly benefit, but her daughter would face a hike in income tax. Then there are the water charges.

"The water rates really annoy me," says Janet, who once attended a public meeting on the issue. "I remember they kept quoting typical figures for a Band D house but ours were almost double that and yet I have one bathroom and one kitchen sink. How can they say I am using more water than a house with four or five people?"

Labour say they plan to phase out water charges for pensioner households, but will that apply to a household made up of a pensioner mother and a working daughter?

As always with local taxation, the devil is in the endlessly complex detail.

What the parties say
Minimal changes to council tax, splitting the top and bottom bands to make small numbers of people pay more and small numbers of people pay less.

Cut water charges in half for pensioners within two years, and abolish them inside four years.

Abolish council tax and add 3p to income tax, funding the gap in income for local government through 1.5% annual efficiency savings on central government. This, the party says, is the "biggest tax cut for a generation".

Cut council tax bills in half for pensioner households, using money from mutualisation of Scottish Water. Opposed to local income tax.

Lib Dem
Abolish council tax and add between 3.5p and 3.75p to income tax to provide incentive of small measure of local flexibility to councils. Claims that 70% of households would be better off.

Would prefer an overhaul that replaced council tax and business rates with a new Land Value Tax, but is likely to support local income tax.

Scottish Socialist
Would replace council tax with a Scottish Service Tax - in practice the same as the local income tax proposed by others, but more progressive to take most from those on highest incomes.

Tommy Sheridan's party inherited the same proposal for a Scottish Service Tax, which predates the split from the Scottish Socialists. Those earning less than £10,000 a year would pay nothing.