Chris Williamson, the staunch Corbynista MP, resigned from Labour's frontbench today.
He had suggested doubling council tax on better-off homes.
'The only reason Chris Williamson has been forced out is because he exposed Labour's plans for soaring increases in council tax, and his plans have been endorsed by Labour activists across the country.
"In a statement, Willamson said he had quit his role as shadow fire minister in order to be free to "[campaign] on a broader range of issues".
But his resignation is being linked with the council tax idea, which Labour is not thought to be now considering.
Labour leader Corbyn praised the MP for his work, particularly relating to the Grenfell Tower disaster.
Under the initiative, the levy could be frozen for properties in Bands A to C, with a progressive rise after that leading to a 20% increase for Band D homes valued between £68,000 to £88,000, and a 100% hike for Band H ones worth more than £320,000.
Matt Rodda, one of Wokingham's four MPs, has been appointed by Jeremy Corbyn to serve in Labour's front bench.
Mr Williamson said: "I will be standing down from my role with immediate effect so that I can return to the backbenches, where I will be campaigning on a broader range of issues".
Mr Williamson stressed the plan was not Labour Party policy and would need to be backed in local referendums before it was introduced.
Asked if he was still on good terms with Mr Corbyn, the MP said: "Let me be clear, Jeremy Corbyn is a very close friend of mine, a good comrade and in my view the best leader this party has ever had".
At the time, Board of Deputies Vice President Marie van der Zyl said: "The Jewish community would expect a Labour MP and shadow minister like Chris Williamson to show solidarity with those suffering racism within his own party rather than blaming the victims".
'Unless the Government has a change of heart, this could be the only a way of arresting the cuts and generating some income to start to grow local services.
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