Article

Economics

Politics

24 October 2024

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.

Laurence Fletcher

Laurence Fletcher is a journalist at the Financial Times.

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

Conspiracy theory

Culture

Politics

18 September 2024

5 min read

US election: the primal stories trumping facts

Projections and polls cannot capture the power of stories shaping identity.

Jared Stacy

Jared Stacy holds a Theological Ethics PhD from the University of Aberdeen. His research focuses conspiracy theory, politics, and evangelicalism.

a map depicts US states coloured red and blue.

538 election prediction map.

ABC News.

Washington D.C. — Election throes in America are intensifying while citizens prepare to cast their votes. The last week alone has been something like a whirlwind, not to mention the entire campaign itself.

Last week, Americans tuned into the first and possibly final Presidential debate between Trump and Harris. On the heels of the debate came a flurry of propaganda leveled by JD Vance (and promoted by Trump) against Haitian migrant communities in Ohio. These claims resulted in bomb threats and school closures.

And to wrap up the week, a second assassination attempt on Donald Trump in nearly as many months. Trump and his campaign, quicker and more direct that the first attempt, quickly cast the blame towards Democrats, specifically for what they see as violent rhetoric in describing Trump as a “threat to democracy.” Trump meanwhile continues to campaign on threats and claims of election fraud, refusing to signal he’d accept the certified results of the election in the event he loses.

That’s just another week in an unpredictable American presidential election.

Americans are besieged, all of us, by a throng of pollsters, partisans, and pundits. Each trying to ride the raging bull of the election cycle.

And life goes on. For now, in this time, in my small corner of American life, I find there is this mixture of exhausted apathy and existential rage. In view of the spectacle, there’s a general exasperation of “what will happen next?” But more personally, dispersed on social media, is the existential zeal and dread—“we” have to defeat “them!”

The danger of this mixture is twofold. Just as odd as it is potent. It is also combustible. And just as it can lay dormant; it can also be summoned by a mere spark.

Americans are besieged, all of us, by a throng of pollsters, partisans, and pundits. Each trying to ride the raging bull of the election cycle with predictions and projections. Some offer prayer.

I listen in on conservative Christian talk radio. Prayers offered on air for God to intervene. What follows is a litany of slogans— “secure our borders” and “defend life” and “the economy” — and of course prayers for the salvation of those who think differently.

Then, there’s more daring outrage merchants with deep pockets. Those who try to shift the election through nefarious means. Like the case of Tenet Media, a media network of right-wing American podcasters who were recently indicted by the Justice Department for receiving Russian funds through fronted companies.

It seems to me that the heart of the matter in the midst of this election, deeper than policy and beyond the spectacle, is that none of us are entirely sure what reality another person inhabits.

A new study published last week found that most registered Republicans (at 67 per cent) trust the Trump campaign as their primary source for election information. Trump’s word, for nearly three quarters of his party, is given more authority than government certification, media-based news, or local news.

This raises the possibility that, in 50-some-odd days, if Trump refuses to concede, if he repeats claims of election fraud, his base seems ready and willing to believe it.

Our social and political worlds have been set on fire not for want of facts but by stories which overpower fact with meaning.

Alongside the debates about policy, the propaganda that stokes division and dehumanizes migrant communities, is a deeper crisis of source authority. Of not just “facts” but truth, of meaning, of reality.

The study revealed that most Americans signal they tend to trust information that comes from “data” and “facts.” But oddly enough, nothing about that statement seems to accord with the on the ground reality of America’s social fabric.

We should know by now: facts have never been enough.

100 years ago, as novelist Rebecca West reflected on the chaotic series of events that sparked World War I, she admitted, “I shall never be able to understand how it happened. It is not that there are too few facts available, but that there are too many.”

What seems “real” for many Americans is not (and perhaps has never been) rooted entirely in the all-powerful “fact.” Our social and political worlds have been set on fire not for want of facts but by stories which overpower fact with meaning. These stories are primal. They’re the kind which create identities and bind communities. They are rich in meaning and so prove entirely immune to fact-checking operations. Source authority has no power apart from primal stories. And though projections and polls tend to focus on the data, they cannot capture the power of stories which create identity and contain community. This is the stuff the vote is made of, too.

This past week, JD Vance defended his propaganda in the form of conspiracy theories of Haitian migrants eating pets by telling CNN, “If I have to create stories so that the American media actually pays attention to the suffering of the American people, then that's what I'm going to do.”

Ends-justifies-means has always been ascendant in politics. Nobody is arguing that MAGA invented political expediency. But this election is careening towards deep waters which we would do well to avoid.

“Propaganda is a means to an end,” said Reich Minister of Propaganda Joseph Goebbels in 1934 before an audience at Nuremberg, “…it provides the background music...[it] miraculously makes the unpopular popular, enabling even a government’s most difficult decisions to secure the resolute support of the people.”

I do not know what the next 50 days will hold. I remain deeply concerned that the word of Trump aspires to assume an authority which sees democracy as a meddling imposition in one man’s destiny. But I do know that none of this is fated. As Augustine observed during the throes of Rome’s collapse: “Bad times! Hard times!” this is what they are saying. But let us live well and the times shall be well. We are the times. Such as we are, such are the times.

May it be so.