Article
Economics
Politics
1 min read

How can taxes build a better society?

As we await Rachel Reeve's budget announcement, Laurence Fletcher wonders what positive tweaks can be made to our economic system.
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Few doubt that Chancellor, Rachel Reeves, will be putting up taxes when she presents her first Budget on October 30. The political narrative of recent months has very much been of an alleged fiscal “black hole” of £22bn - or is it £40bn? - that somehow needs to be filled.

While the size of the shortfall and the identity of those responsible are both hotly disputed, and despite a lack of detail from the Treasury about what it actually consists of, the questions now being asked are not whether taxes will rise but which ones and by how much. 

Months of speculation have focused on employer National Insurance, capital gains tax and freezing income tax thresholds as areas that Reeves could look to for the additional revenue. But beyond the immediate issue of raising enough revenue to make good any shortfall, lies a deeper, trickier question about the way in which taxes should be levied for the good of society. If a government is to force people and companies to hand over their money, then what is the most ethical way to do this? Who should pay and who shouldn’t? How can tax be used to reduce inequality and build a better society?

Answering such questions is, of course, far from straightforward, because there are plenty of other factors in play.

For instance, some taxes are surely levied because they are simpler to collect. Take income tax - an unpopular measure introduced in 1799, then abolished before being reintroduced as a supposed temporary measure. It could certainly be argued that taxing people’s income - their attempt to get on in life and improve their lot in life - is less “fair” than taxing wealth that has been accumulated by someone’s ancestors years ago. Working hard and earning income is often surely a way of breaking down class divisions. But income tax - contributing 28 per cent of UK government tax take in 2023-24, according to The Institute for Fiscal Studies - has the advantage that it is relatively difficult for the average worker at a UK company to avoid it. Ease of levying it is surely a driver. 

Equally, some taxes that might seem “fairer” have deliberately not been levied because of the difficulty in collecting them, and/or because to try to do so could be counterproductive. A wealth tax, for instance, would be “economically damaging”, according to one of the UK’s highest profile tax experts, Dan Neidle. Or take the politically contentious issue of non-doms, a colonial era tax break allowing rich foreigners to avoid UK tax on overseas income. It would be fairer, the argument goes, to tax them on the whole of their income. If they are going to be resident in the UK, then surely they should be taxed like a UK resident whose home is here?

Former Chancellor Jeremy Hunt abolished this regime earlier this year but left a number of concessions that the incoming Labour government pledged to abolish. But non-doms are tax-sensitive and highly mobile, and a number of jurisdictions compete to attract them. Many are entrepreneurs and wealth creators that many countries need. Reports have suggested a clampdown could raise no money or even cost money and could drive people away.

So what can be done to use tax in an ethical way? Paul Williams, research professor of marketplace theology and leadership at Regent College, Vancouver and chief executive of the Bible Society, takes a perspective that he believes offers some solutions.

He takes as his starting point a story in the gospels, where Jesus is asked whether people should pay taxes to Caesar. The question is a trap - either Jesus gives his backing to taxation that is highly unpopular with the Jewish people, or he rejects the tax in an act of rebellion against the Romans.

Jesus replies that they should “pay to the Emperor what belongs to the Emperor, and pay to God what belongs to God.” We are to pay our taxes to those in authority, but we are also to honour God.

While Williams believes that too much emphasis is placed on the Budget and political parties’ promises to be able to fix everything, and that a more radical rethink of our economy is required, he also sees room for positive tweaks to the current system.

One key area is the property market, the manifestation of so much inequality in society, with some people owning multiple houses while others cannot afford to buy one. Williams argues that the ready availability of debt finance has allowed those who already hold assets to easily acquire properties, turning real estate into an investable asset class to the detriment of many of the poorer in society.

“The reason there’s so many homeless people and empty houses is due to debt finance. It makes it easy for a relatively small proportion of the population to acquire a large percentage of the assets.

“The system has allowed a structure in which a small advantage in the beginning can lead to big, big differences over time.”

Williams highlights parts of Devon and Cornwall that have been “completely ruined” by wealthy people from elsewhere buying second homes that used to belong to locals, leaving property out of reach of anyone who lives and works there.

Nevertheless, he believes taxation can be used in this area to help level the playing field.

He proposes a “pretty punitive” marginal rate of tax on ownership of more than one home. (Stamp duty only partly does the job and is a blunt instrument also affecting people moving homes, thereby makes mobility expensive).

“You want to disincentivise the way the housing market is used for speculation,” he says.

“Housing is being treated as a commodity. The problem is, it’s not; it’s not just an asset. It has utility value and a communal and quasi-spiritual value, enabling people to feel rooted.”

Buy-to-lets, meanwhile, are better than having empty second or third homes, but “wouldn’t it be better if occupiers could buy that house?” he adds.

Meanwhile, research by the Financial Times recently found a huge wealth gap between the average millennial and the top 10 per cent of millennials, who are benefiting from family wealth to accumulate substantial housing assets. 

So would increasing the rate of inheritance tax - one of the most hated of taxes - and/or lowering the threshold also help reduce some of this inequality? After all, how is it fair that one child in the UK is born to inherit large property wealth while another is born to inherit little or nothing? Or, even worse, that second child will only ever be able to afford to be the tenant of the first, paying them rent for the rest of their lives? Williams is not a fan of inheritance tax per se, arguing that it is “not part of the package” in a Biblical image of a flourishing economy. But he adds an important caveat: “the playing field is not level".

“There might be circumstances to impose a one-off tax on the very wealthy… if you want a transition to a more equitable society.”

Such steps are not easy to take. It is, he admits, probably “career suicide” for a politician to adopt such views. But if we are to take steps towards a fairer way of life, and avoid a two-tier society in decades to come, then maybe the conversation needs to shift this way. Perhaps the Budget could be the time to start.

 

Article
America
Character
Culture
Leading
Politics
1 min read

A question of character: why do some evangelicals back Trump?

Whatever leaders say, it's what they do and who they are that matters.

Graham is the Director of the Centre for Cultural Witness and a former Bishop of Kensington.

President Trump speaks in the White House
The White House.

The USA is a strange place. At least to us foreigners. Already this year I have spent two separate weeks there. The first was a week in Texas where Trump/Vance flags flew triumphantly and shops proudly displayed MAGA hats and related merchandise. The second was a week on the liberal west coast, in San Francisco and Seattle, where it was Pride flags that fluttered in the wind, and Trump and his lackeys were viewed as the enemy of everything good and true. There could hardly be a greater contrast. 

I've been trying in particular to get my head around why evangelicals have so solidly backed Donald Trump, especially so since I grew up with and still to an extent own that label here in the UK. I spoke recently with Walter Kim, a gentle, thoughtful Korean-American leader of the National Association of Evangelicals. He pointed out that the evangelical constituency in the USA is far more ethnically diverse than the image of the white, country-music loving, confederate flag-flying southern Republican that we often assume in Europe. Many evangelicals worship in churches which are ethically very mixed, and who have no time for Trump whatsoever.  

For him, the name ‘evangelical’ had been hijacked by a political movement. Many people assumed that if you are Republican in your sympathies, voted for Trump, and are resistant to the ‘woke’ policies of the Democrats, then you must be an ‘evangelical’ regardless of your religious or theological convictions. Bizarrely, he pointed out that in a recent survey, a significant number of Muslims had claimed the designation ‘evangelical’. I told you America was a strange country. 

Now of course, many evangelicals do support Trump. Yet even among them, it is hard to find anyone who will mount an argument for him as a moral exemplar, a shining example of virtue and integrity. Even those who support him acknowledge his own moral frailty, his murky past in relation to women, financial dealing, and truth-telling. Be that as it may, there appear to be two broad positions evangelicals take for supporting Trump. 

One is to say that his character may be flawed, but his policies are good. Tim Alberta's book on American Evangelicalism, The Kingdom the Power and the Glory, suggested that for some evangelicals, voting for Trump was “nakedly transactional - Christians trading their support sans enthusiasm in return for specific policies.” 

Most evangelicals are of the opinion that there is something fundamentally wrong with putting an essentially male boxer in a ring with a female one. They feel distinctly uneasy with the widespread and cavalier destruction of what they consider to be nascent human lives in the womb. They value traditional marriage and the family as a key building block of a healthy society and as the best means to bring new lives into the world and nurture them through their formative years. Some think the right to carry a gun is a safeguard against lawlessness and encroachment on the privileges of the individual.  

They may also be nervous of the impact on the USA of illegal immigration, dislike economic policies which have raised the cost of living - especially tough if you are poor, are anxious about the rise of China as a world power which, if its growing influence across Africa is anything to go by, threatens domination across the globe in coming decades with an atheistic regime hostile to Christianity and religious freedom. 

For them, the Democrats under Joe Biden seemed to ignore all of these things. They seemed to be wrapped up in a small bubble of their own marginal issues and grew out of touch with ‘mainstream America’. And so many evangelicals voted for Trump, with deep reluctance given his moral frailty. His polices were OK, but the deal was worth it, even if his character was dodgy. 

Yet, as Alberta observes, there is now a different strand of evangelical support for Trump, much more bullish and brazen. He is, they claim, yet another of many flawed leaders that God has used for his purposes in the past. In the Bible, King David had his mistress’s husband murdered so he could marry her; his son Solomon had a weakness for women and yet was used by God to build the great Jerusalem Temple; King Cyrus was a Persian king who allowed the Israelites to return from exile. Trump is now the chosen one of God to restore America as a Christian nation, despite his flaws. 

In both of these approaches, the assumption is that good character is desirable, but not essential for leadership and establishing good government.  

I am not so sure. 

Of course, getting good policies matter. Yet character matters just as much, if not more. 

As it happens, the story told in the Bible doesn’t think flawed, unrepentant leaders are good leaders for a nation. After the contract killing, King David realised he had done something terribly wrong and was deeply remorseful for his actions. Solomon's wandering eyes caused untold damage to Israel in future years, leaving it open to all kinds of destructive idolatry. And Cyrus was never a king of the nation of Israel anyway, just a neighbouring potentate whose foreign policy enabled something good to happen. 

The problem with adopting an unrepentant leader with deep moral failings is that leaders set the tone for the organisations that they lead. It's true of any school, church, business or government. Whatever leaders say, it's what they do and who they are that matters just as much. And that is because what they do and how they are gives an idea of the kind of behaviour that is least permissible, but at most recommended, to get things done.  

A leader who achieves results through bullying, demeaning opponents, getting rid of the people who confront him, and who thinks that making a lot making a lot of money is both the main aim in life and the marker of success, sends out the unspoken message that bullying, domineering and making money are the thing to do. This is how to get on. Such behaviour will always be overlooked with a smirk, or even rewarded. He - or she - sets the tone for the nation / business / organisation / church. 

It's an age-old rule. Kids pick up the behaviour of their parents. Churches reflect the personality of their pastors. Businesses end up taking on the character of their CEOs. Boris Johnson fell from grace as Prime Minister of the UK not because of his economic or social policies (if he had any), but due to his character – an inability to tell the truth eroded trust and came home to roost in the end.  

Of course, getting good policies matter. Yet character matters just as much, if not more. We might argue the toss over whether Trump's tariffs, his standing up to China, his approach to getting a peace deal in Ukraine, his reversing of illegal immigration is, or is not, the right policy. But the way he goes about these things speaks more loudly than the policies he adopts. The way we do things is as important as what we do.  

In leadership, competence and chemistry matter. But in the long run, character matters the most. 

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