The introduction of a local income tax is among options being considered by ministers in a review of how local government should be funded in the future.
Many pensioner groups say the council tax penalises their members
The proposal - a flagship policy of the Liberal Democrats - emerged following a two-and-a-half month consultation of members of the public who generally agreed that council tax levels were "not acceptable" and "should be seriously reformed or abolished".
Local Government Minister Nick Raynsford sent out invitations to interested groups for their views on whether there was a problem with the current tax and what they would do to change it.
But despite recent mass protests, particularly by pensioner groups over large increases in council tax, the consultation only attracted 216 responses.
Most of those were e-mailed or sent in from local authorities, other organisations, such as the Mayor of London and the Federation of Small Businesses, as well as a few from members of the public.
Mr Raynsford, who chairs the Balance of Funding Review Steering Group, which is looking at local government funding, has already admitted recent council tax rises have reached "the limit of acceptability".
He said it was now "right to look at some of the most frequently suggested options in more detail".
These included a full reform of council tax, the re-localisation of business rates and the introduction of a local income tax.
But a spokeswoman for the Office of the Deputy Prime Minister was swift to make clear that these were just suggestions being considered by the review group and were a long away from becoming firm recommendations.
"As part of their review, obviously they have to look at all of the options," the spokeswoman said.
"They are looking at the responses from the consultation and the suggestions that have been made.
"There are some suggestions for local income tax that came up. That's just one of the things they are looking at. They are also looking at reclassification of business rates and reforms to the current system of council tax.
Council tax levels are considered 'not acceptable' by some people
"We are just at the stage where they have decided what they are going to look at in the next few meetings. There are absolutely no proposals. Just because they are looking at something, doesn't mean it is going to happen.
"There is a great difference between a review group looking at lots of different options, of which local income tax is one, and making any decisions."
'Unaffordable' council tax
People who took part in the consultation were reported to generally view the council tax as "unaccountable" due to its complexity.
They said it was "unaffordable for those on fixed incomes", and there was "much interest" in having a range of taxes and in more money raised from smaller taxes like local sales tax, vehicle excise duty, trading and charging.
Mr Raynsford said: "The group received over 200 responses to its invitation to submit reviews to the review on local government funding.
"These response covered a wide range of opinions and it is clear that there are no easy answers, but we thought it was now right to look at some of the most frequently suggested options in more detail."
The group will meet again in January, with a final report due later next year.
Plans to abolish the council tax and replace it with a local income tax of up to 3% were backed overwhelmingly by Liberal Democrats at their annual party conference in September.
They claimed the new local tax, based on earnings, would make 70% of people better off.