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.

Essay

America

Comment

Leading

Politics

31 October 2024

6 min read

Democracy, hypocrisy and us

A deep dive into the pitfalls of political vision and our response to them.

Josh Richards

Josh is a curate in London, and is completing a PhD in theology.

Donald Trump holds his arms out to his side while speaking.

Trump addresses a faith leader event.

x/realdonaldtrump.

Coverage of the Republican candidate for Vice-President, J.D. Vance can't help but return again and again to his Christian intellectual influences. Whether it's an interview with Rod Dreher or an analysis of Patrick Deneen and other 'New Right' thinkers, many US political journalists are having to give their readers a crash course in some of the most controversial ideas in contemporary theology. One recent Politico article stands out because it didn't just introduce an unsuspecting audience of political obsessives to an obscure theologian, it also told them (us) about contradictory ways one might read said obscure theologian. And yet these contradictions force us to confront a difficulty facing anyone engaged in democratic debate.

In the article , Ian Ward sought to explore the impact of Rene Girard's scapegoat mechanism on Vance. In doing so, Ward underlines the importance of Girard's ideas in the intellectual circles around J.D. Vance and his mentor, Peter Thiel.

Girard, a French academic who died in 2015, is remembered foremost for his analysis of the relation between desire and conflict. Girard proposes that desire is ‘memetic, that is to say, it mimics; I want what I see that others want. This naturally leads to conflict, a conflict that can only be resolved by a scapegoat. Identifying a scapegoat, an out-group, is a force powerful enough to create a sense of solidarity between those would otherwise be in conflict over shared desires.

The Politico take considered how Vance's reading of Girard might relate to Vance's defence of his running mate's false suggestion that Haitian immigrants are eating their neighbour's pets in Springfield, Ohio. It went as far to suggest that—rather than a rejection of Girard's analysis— Vance could be understood to be applying a pragmatic reading of Girard. Ward writes:

Though Girard never said so outright, some of his interpreters have argued that Girard’s idea of the Christian ethic — which in theory offers an alternative to ritualistic violence as a basis for social cohesion — cannot in practice serve as the basis for a large, complex and modern society.

Scapegoating is inevitable, deploy it to your advantage. We cannot know how exactly this or any reading of Rene Girard factors into his political tactics. What we can know is that Vance's public fascination with big ideas opens him up to a charge upon which a healthy democracy depends: hypocrisy.

In contrast, there is often a surprising transparency to Trump's appeals to self-interest, Addressing a audience in July, Trump declared:

Christians, get out and vote, just this time. You won't have to do it anymore. Four more years, you know what, it will be fixed, it will be fine, you won't have to vote anymore, my beautiful Christians.

As much as Vance and others try to change this, there is little ideological content, no substance behind ‘Make America Great Again’ insofar as Trump tells it. It is politics at its most transactional and what Trump offer his supporters, beautiful or otherwise, is so often a scapegoat. Trump tends to be pretty open about this and, as ugly as this kind of politics is, there is a strange kind of honesty to it. But Vance is different. He has big ideas. And however weird you may think these ideas are, and however much tension there seems to be between his love of Rene Girard and his scapegoating of Haitian immigrants, democracy is better for that tension. Constructive democratic debate, in some sense, depends on hypocrisy. Without it, democracy would be nothing more than a negotiation around mere self-interest.

A politician with an ideological vision is one that can be held accountable. Keir Starmer's recent decision to pay back £6,000 worth of gifts is a case in point. Had he not sought to set himself as a contrast to the Boris Johnson of Partygate, the criticism of his accepting clothes and tickets would not have had the same bite.

Stumbling into politics haunted by a sense that things could be better will make us hypocrites on impact.

The first generations of Christians encountered a similar problem. The law they believed that they had received from God showed them a vision for the good life just as it revealed all the ways they fell short. As the early church leader Paul wrote: “through the Law comes the knowledge of sin.” We might add that through political ideology or aspiration comes the knowledge of political hypocrisy.

Had Vance never publicly explored Girard's theory, if he were only an opportunist more like Trump, we would have one less means by which to hold him to account. Every politician will be found lacking when judged by their public ideological aspirations. And the more ideological aspirations, the greater the charge of hypocrisy. Hypocrisy will always be found wherever we find people debating and aspiring to ideas more perfect than they are. I'm not defending any individual hypocrisy; the residents of Springfield, Ohio and newcomers across the US deserve so much better. Hypocrisy is always disappointing, but it is less disappointing than the alternatives: either a naked pursuit of self-interest or a naïve expectation of ideological purity.

The question for each of us in a democracy is how we live with hypocrisy, expecting it while still expecting more from those who wish to serve us in public office. And a moment's introspection reveals that it is a charge that confronts each of us also: the shaming gap between my aspirations for my life and the reality. To ask how we live with these hypocritical politicians is really to ask how we live with ourselves?

With that we return to Girard. He claimed that Jesus Christ willingly became a transparently innocent scapegoat and in doing so undermined the mechanism. In the Politico article, Vance is quoted as follows:

In Christ, we see our efforts to shift blame and our own inadequacies onto a victim for what they are: a moral failing, projected violently upon someone else. Christ is the scapegoat who reveals our imperfections, and forces us to look at our own flaws rather than blame our society’s chosen victims.

The exacting logic of the crucifixion prevents us from scapegoating even the scapegoating politicians.

But Jesus’ death is more than an embodied social critique. In coming to us and dying in the person of Jesus, God showed his love for imperfect people struggling under the weight of perfect ideas. He came to give the home and safety we all desire, offered freely to hypocrites. The point of Christ's death is not, at least in the first instance, to inspire me to treat others better. It is God's unconditioned offer to the broken and hypocritical, as the broken and hypocritical, not as he'd rather we be.

Paul puts it like this: "God demonstrates his own love for us in this: While we were still sinners, Christ died for us." Yes, God's grace is too dramatic, too strong not to provoke us and empower us to change, but his love comes to us before any change. It comes to us as we are, nursing our pitchforks and that self-righteous sense that it's all really someone else's fault.

Stumbling into politics haunted by a sense that things could be better will make us hypocrites on impact. We must not excuse this hypocrisy; we should hold ourselves and our leaders to account. And yet we can do so gratefully haunted and gratefully held by a God who came for hypocrites.