The changes, put forward by the Association of Metropolitan Authorities, would see council tax payers in Westminster's band D properties paying £535 a year compared with the current £295.
The paper proposes to end the advantage Westminster gains from the high number of visitors and commuters which flood into central London every day.
Under the current system commuters and visitors, who swell the day resident population by more than 80%, are presumed to be as socially and economically deprived as the residents in the borough. This means the unemployment rate is regarded as being the same among commuters as the resident population and that visitors are deemed as living in overcrowded accommodation.
He calculated that if every local authority received the same help per head of population, 94% would not have to collect council tax at all and eight would be able to pay a refund of £1,000.
The proposals would give a flat-rate figure for each commuter and visitor, so councils across the country would receive the same grant aid per visitor.
Westminster would lose £26 million in grant from the government, but other areas of the capital with a high number of commuters or visitors would also be hit. The City of London would lose £15m, Camden £6m and Kensington and Chelsea £2m.
The proposed changes would see gains for the majority of AMA members and for councils in outer London. 'The report reflects the concerns of many of our members that the present method . . . is flawed,' said AMA finance policy officer, Phil Walker.
Ministers, who have constantly stressed that the grant distribution system should be impartial, will be under pressure to accept the change.
The Association of London Government said it had yet to decide whether to back the changes.