Plans for five pilot rubbish charging schemes mark a "wholehearted retreat" and should be dropped, MPs have said.
The government hopes to boost recycling and reduce landfill waste
The local government committee urged ministers to give all English councils powers to introduce their own schemes - as originally announced in May 2007.
It said the new proposals were a "messy compromise" following hostile media coverage and would not show if such "pay-as-you-throw" schemes worked.
Ministers, who want to cut landfill waste, said pilots were a useful test.
The UK has to reduce waste going into landfill by nearly two-thirds by 2020 to meet EU targets.
The minister for climate change, Joan Ruddock, defended the schemes.
"I think the committee has really been quite pessimistic about this and we think that these pilots will work.
"We think that there are local authorities who will want to do the schemes and that they will be effective in getting our recycling rates even further up than they are already.
"We don't apologise in any way for listening to the opinions that have been put to us and responding to them by saying we will start with pilots."
In the Climate Change Bill there are proposals for five areas to pilot a scheme aimed at getting more people to recycle waste.
Householders who recycle the most would get a financial reward, those who recycle the least would face a fine.
In May 2007 the government said all 354 local authorities in England would be allowed to introduce the scheme - but in November this was restricted to five pilot areas. An England-wide rollout was put back until 2012-13.
Under the current proposals, councils would not be able to raise any money from the schemes themselves - all money raised would be redistributed in rewards.
In its report, the Communities and Local Government Select Committee said, as there were already schemes operating across Europe, "a mere" five pilot schemes would add little to the understanding of whether it would work in England.
It said it was hard to see why any council would volunteer to "set up a complicated charging scheme that earns it no money and risks widespread public disapproval".
The committee's Labour chairman, Phyllis Starkey, said the government had "in the face of highly negative media coverage, mounted a wholehearted retreat from even the limited policy outlined last May".
The committee also said the government was being "over optimistic about the impact charging will have on householders" who believe they already pay for rubbish collection through council tax.
And it said the government's plans to cap the highest penalties or rewards councils could offer "runs counter to the government's rhetoric on devolution".
Instead councils should be given the option to introduce their own schemes and decide what rewards or fines, if any, should be levied.
They also pointed out that Ms Ruddock had told the committee the charges were "definitively not a tax", then said they were considered "a form of tax" by the Treasury. The apparent confusion was "a matter of considerable concern", MPs said.
Ms Starkey said she thought the government had backed down because of the "very virulent press campaigns that there have been criticising changes in the way waste disposal is collected".
Shadow local government secretary Eric Pickles said the report showed Prime Minister Gordon Brown "has become the living embodiment of the law of diminishing returns".
"Week by week, his plans for bin taxes, like so many other policies, suffer a new blow to their credibility," Mr Pickles said.
"He should now stop his dithering and have the courage to scrap these flawed and unpopular new taxes completely."
And Liberal Democrat communities and local government spokesman Julia Goldsworthy said: "These pilot schemes have been wrapped up in so much red tape and complexity that their chance of success was impossibly slim.
"The government may as well have condemned the proposals to the rubbish bin."
But Paul Bettison, who chairs the Local Government Association's environment board, said it was right to let councils choose whether they introduced the charge.
"A lot of councils feel they don't need this particular scheme, this particular power, if you like, and that their residents are doing a pretty good job of recycling already," he told BBC Radio 4's Today programme.
"One size doesn't fit all. One solution isn't ideal for every council in the country."