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

Culture

Politics

Psychology

29 August 2024

5 min read

To troll or be trolled?

Laughing at others conceals a terror of being laughed at ourselves.

Roger Bretherton

Roger Bretherton is Associate Professor of Psychology, at the University of Lincoln. He is a UK accredited Clinical Psychologist.

Donald Trump gestures with his hands while someone holds a mic in front of him,

Politics and satire belong together, they deserve each other. Humour has been part of politics ever since the first jester dared jingle a bell in the face of a king. Those who get their kicks from bursting the bubbles of the pompous are drawn to the corridors of power like moths to a flame. But in recent weeks laughter has hit the headlines again. A couple of weeks ago, when Democratic presidential candidate Kamela Harris chose her running mate Tim Walz, the only thing most of us knew about him was that he was the one who had called Trump ‘weird’. A few minutes of furious googling later we knew much more, but the suspicion lingered that he had been picked for having finally answered the question that had plagued the Democrats for nearly a decade: how do you deal with Donald Trump?

As a psychologist who works with leaders I have been asked this question numerous times. How do you go up against someone with the magnificent trolling skills of Trump? Is it possible to win against a person so adept at humiliating those who oppose him? And I think Walz is on to something. He hasn’t called Trump a threat to democracy or labelled his supporters a basket of deplorables. No. He has called Trump weird, and his supporters good dinner guests. Why is Trump weird? Because, says Walz, he has never seen him laugh.

Trump is not the only one accused of being humourless. Our own former Prime Minister, Liz Truss, was equally unamused at becoming the butt of the joke, when a banner reading ‘I Crashed the Economy’ next to a googly eyed lettuce quietly descended behind her during an onstage interview. She left the stage abruptly and was quick to respond on X that what had happened was not funny. Most people thought it was funny and that she – like Trump – was slightly weird not to laugh it off, at least a little bit. As the political prankster Noël Godin once said: there is no better way to judge a person’s character than by how they behave when hit by a custard pie.

We spend our lives subtly and unconsciously evading the slightest whiff of humiliation.

There is however a deep psychology behind all this hilarity, or lack of it. For decades now psychologists have conducted numerous studies on the phenomenon of Gelotophobia. Not the fear of ice-cream, as one might initially think. Gelotophobes you’ll be pleased to know are perfectly capable of holding it together in the presence of a knickerbocker glory. What they fear is being laughed at, and as always this sounds infinitely more sophisticated translated into Greek (gelos/laughter, phobos/fear). Much of the gelotophobia literature is a heartbreaking tale of young people crippled by the fear that others will laugh at their weight, or their acne, or target them for bullying. Sticks and stones may break our bones, but mocking words it seems can leave us socially terrified for the remainder of our adult life. In its most debilitating forms gelotophobia is a cause for clinical intervention.

But the study of gelotophobia goes further than treating the clinically distressed. Lurking among the samples and statistics is a wisdom that helps us understand why Trump and Truss are the people they are, and more importantly teaches us something about ourselves. Because most of us in some mild sub-clinical way are gelotophobes. We spend our lives subtly and unconsciously evading the slightest whiff of humiliation. Margaret Atwood was no doubt right to say that men are afraid that women will laugh at them, and women are afraid that men will kill them. But many people would rather die than be laughed at.

Could it be that our love of laughing at others conceals a terror of being laughed at ourselves?

One of the primary findings about gelotophobia, is that those who are most scared of being laughed at are also scared to laugh. To say of Trump or Truss that they lack humour is equally to say that the last thing on earth they want is to be the object of laughter. Most gelotophobes were once victimised, ostracised or bullied, and humour was the chief instrument of their humiliation. They were forged by the cruel conditioning of mockery. As a result, they view laughter-eliciting situations negatively. In facial coding studies they show less joy and more contempt when presented with smiling joyful people. The inner freedom to join others in laughter has been quashed by the suspicion that the laughter of others is a threat. Some compensate for this by making sure they always have the upper-hand, always the troll never the trolled. Which speaks to another finding, more applicable to Trump than to Truss, that derisive humour is the way narcissists conceal their vulnerability. Behind every grandiose expression of superiority, lies a shame and inferiority that can be defended by attacking others.

Gelotophobia ultimately is a subtype of our fear of being disliked, and if the bestseller lists are anything to go by, this is clearly a pressing concern for many people. Fumitake Koga and Ichiro Kishmi brought the wisdom of Japan to the question in The Courage to be Disliked, and Ryan Holiday did the same from a Stoic perspective in Courage is Calling. How to live in a world that shapes us through the threat of ridicule has been pondered for thousands of years. It even turns up in the New Testament of the Bible. When the disciples of Jesus stepped out to deliver their first public discourses, they were accused of being drunk, stupid and presumptuous. The word used to describe them in the historical sources is parrēsia, usually translated bold, but perhaps more accurately rendered the freedom to say anything (pas- all; rheō- to utter). For them freedom of speech was not a societal given but a virtue they enacted in spite of their society.

In the ancient world the term parrēsia was more often used to describe the counter-cultural courage of the Stoic philosophers. But the disciples were not Stoics. They weren’t schooled in the rigours of Greek philosophy, but rather apprenticed to the Hebrew prophetic tradition. A tradition which equally appreciated the inevitable opprobrium befalling those who presume to critique and rejuvenate a stale culture. They were simply following the teaching of the master who pointed to ridicule, scorn and gossip not as PR disasters to be managed, but as prophetic honours to be celebrated. Or, as Marty Babcock once claimed, ‘Jesus promised his disciples only three things: they would be absurdly happy, entirely fearless, and always in trouble.’

We should be cautious then laughing too much at the embarrassments that befall our political class, and perhaps more attentive to what our schadenfreude might point to within us. Could it be that our love of laughing at others conceals a terror of being laughed at ourselves? Even worse, what if vindictively celebrating their misfortunes is itself a symptom of the inner helplessness, inertia and unfreedom we claim to oppose? Or, to give the same question a more positive inflection: what would we be doing or saying differently if we were genuinely and entirely free of the fear of being ridiculed?

Blessed are those who do not fear the laughter of others for they may change the world.