Councils should be able to charge households for how much rubbish they throw away, Sir Michael Lyons' inquiry into local taxation has recommended.
The proposal could be an incentive to recycle, Sir Michael said
Ministers should create powers for councils to charge for domestic waste, the review said.
The Department for Environment Food and Rural Affairs (Defra) said it would want such a scheme to work on a "save as you throw" basis.
But shadow local government secretary Caroline Spelman labelled the proposals "an excuse to tax more by stealth".
'Save as you throw'
A charging regime would act "as a powerful incentive on householders to reduce the amount of waste they produce," Sir Michael said.
It would encourage people "to recycle and compost more waste" and might be seen "as a fairer way of spreading the costs of waste disposal, with the heaviest waste-producers contributing most," he added.
Defra is currently reviewing how similar schemes operate in other European countries.
"We hope there would be no cost to residents but possible rebates," a Defra spokeswoman said.
But she said people who refuse to take part would "have to pay in some way".
The Local Government Association (LGA) - which represents more than 400 councils in England and Wales - also supported a save as you throw scheme.
The UK dumps more than 27m tonnes of waste each year
"For decades people have been used to being able to throw their rubbish away without worrying about the consequences. Those days are now over," said LGA chairman Lord Bruce-Lockhart.
Ms Spelman warned of the possible dangers of such a scheme: "These taxes will lead to a surge in fly-tipping and dangerous backyard burning.
"It will have devastating consequences for the local environment and public health," she said.
But the Lyons review insisted the issue of fly-tipping needed to be addressed.
Local councils - not the government - should decide how residents are charged, according to the Lyons report.
"I am not proposing that it be rolled out nationally or in a way that does not reflect community preferences," Sir Michael said.
Barnet environment councillor Matthew Offord said: "This could be a valuable tool, but I wouldn't like to see the councils being compelled to introduce charging."
Sir Michael also warned a poorly thought out charging system could "have the capacity to impact most harshly on those people least able to afford it, particularly young families".
"Public understanding of the principles behind a charging scheme is essential, putting a premium on effective public engagement to secure local support," he added.