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

Conspiracy theory

Creed

Politics

10 May 2024

7 min read

MAGA’s sorting of America

What would Bonhoeffer make of the rogue creed?

Jared Stacy

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

A red baseball cap, with Make America Great Again written across it, sits on an open bible.

Natilyn Photography on Unsplash.

“Ten years is a long time in the life of every human being.” So begins Dietrich Bonhoeffer’s essay, After Ten Years. For him, the decade in question was 1933 to 1943. The place, Germany.

The original essay, penned to mark the new year of 1943, reflects on the tenth anniversary of Hitler’s ascendancy to power through democratic machinery. The piece was sent to an inner circle of Bonhoeffer’s friends. “Are we still of any use?” asks Bonhoeffer. There’s a question I can relate to.

And so, I’ve returned to these modest words again and again these last few years. They’re prophetic, a jolt of honesty born of resilient hope. Not unlike Martin Luther King Jr.’s Letter from a Birmingham Jail, both could be modern epistles.

Their prophetic edge is clearer with eyes on our own situation. 2024 is not 1968 or 1933. As an American citizen, we have our own “decade” to reflect on in the United States. And that is the decade of MAGA, or “Make America Great Again.”

What began as a slogan became a cause which gave rise to a community.

Just 10 years ago, Trump wasn’t sitting in courtrooms. Back then, he stood on a stage to address the Conservative Political Action Conference. He wasn’t a candidate, but a businessman, reality TV star, and disrupter of status quo.

It was at that 2014 meeting Trump uttered that now ubiquitous slogan. Near the end of the speech, less rambling and sharper than his stream-of-consciousness rallies today, the line appears, “we need to make America great again.”

Trump wasn’t the first to use it, that was Reagan in 1980. Then, like now, it evoked a sense of nostalgia, of “good old days” that never were. But nostalgia is powerful, primal. It allows us to persist in the illusion that, for example, the social order of Jim Crow America was somehow more moral and upstanding than our present situation. As if lynchings, mob violence, and political inequality vanish in the mists of our longings. This is and can only be the imagination of white supremacy.

Trump didn’t invent the slogan, but perhaps he was the first to tap into its deepest lode in the bedrock. What began as a slogan became a cause which gave rise to a community. Now, “MAGA” is its own qualifier. We have “MAGA Republicans” and “MAGA Rallies” of the “MAGA faithful.”

Today, we ought to learn that we are simply not tweeting or posting our way out of this.

And where have churches been in these days? Hans Ulrich calls the church a “place of reversal” a place where rogue creeds and words ought to be emptied of their power, where a different public is constituted around the wine, bread, and water. But the lines of MAGA are drawn straight through our churches in America.

Caleb Campbell pastors in Phoenix, Arizona. I asked him recently his thoughts on the impending election, and how it would affect his church. Most churches have already been sorted, he told me. In 2020, churches fractured from within, torn from the pandemic, protests, and the Presidency. But now, there has been a sorting, and settling. The partisan lines, those borders the church is empowered to transgress, are sadly reinforced.

The lasting power of “Make America Great Again” over the last decade is significant. Among practicing Christians, the story we tell about America in our churches has theological consequences. And every church tells this story, implicitly or explicitly, in speech or in silence. And rather than emptying the rogue creed “Make America Great Again” it would seem that in and among many churches across America, it has been given an ample charge of theological authority.

MAGA trades in all the elements of a seemingly eradicated virus called fascism. A mythic past, demographic anxiety, authoritarian rule, all elements converging and colliding in American life. And curiously, the one thing that gives fascism its strength is a failure to remember.

And perhaps this is why Bonhoeffer’s letter, read on the rising tide of anti-democratic platforms, speaks so directly to us. It holds space for a necessary exercise of remembering.

“Who stands firm?” Bonhoeffer asks in the wake of Hitler’s ascendancy. Even the Confessing Church, organized to resist the Nazification of the German evangelical church, soon folded. Pastors either took the oath of loyalty, or enlisted. Time had proved how most attempts to stand firm in the Third Reich had collapsed in on themselves. Such failures mark our day, too.

Bonhoeffer answers his own question in a way that is instructive for us. He surveys all the failed responses to Hitler’s rise. For example, there’s the “reasonable ones” who simply think better answers and clearer communication win the day. Today, we ought to learn that we are simply not tweeting or posting our way out of this. Even more stalwart, institutional efforts fail here. In the torrent of raw information sewage flowing with conspiracies, algorithms, and slogans, reason isn’t enough.

Private virtue “closes its eyes to injustice” and scrolls its own virtue signaling posts with smug self-satisfaction.

There’s the ethical fanatic, who tries to “meet the power of evil with purity of principle.” Many in days like ours are earnest in their convictions, but white-knuckling principles is satisfied not with responsibility but with keeping to some arbitrary vision of integrity that prizes its artificiality, confusing the arbitrary refusal to cede principles with responsible action. There’s those of conscience who, Bonhoeffer notes, can never know the difference between a bad conscience (which can be strong) or a deceived conscience.

The path of duty seems attractive, until we recognize that “just following orders” is the justification of every functionary in Trump’s MAGA machine. And of course, freedom, which can side with the wrong to prevent the worst and so lose its own solid footing. When all else fails, Bonhoeffer holds out private virtue as that last course of action. Not to be confused with monastic retreat, private virtue “closes its eyes to injustice” and scrolls its own virtue signaling posts with smug self-satisfaction.

If all these routes are taken off the table, we find ourselves in position to recognize a bitter truth: we’ve made resisting Trump a good business. Good for convincing stakeholders to fund new ventures, good for justifying ourselves as a moral opposition. After 10 years of MAGA, it’s true that we have assumed much about democracy that can only be realized by vigilance.

Our democracy is a spectacle, not a process. It is an oligarchy of represented interests, not a democracy of representatives. And Trump? The ethos of greatness has always been tied to the former, not the latter. And it is in this situation, not uncommon throughout history, but novel for us who face it, that we can receive the question, “who stands firm?” Bonhoeffer’s question resounds.

If the resistance of reason, principles, duty, or virtue fail, then what? Bonhoeffer’s insistence is that responsible action is “nothing but an answer to God’s question and call.”

Does this mean only Christians can save the world? That Christians are inherently “better” or “righteous” in politics? No. But ten years of MAGA would seem to suggest that this belief continues to animate the evangelical political machine. This is not Christendom; living “in answer to God’s question” means that Christians, simply by virtue of the story we confess and participate in, point to the One who saves.

The singular answer Christians give, of a witness to God’s call, is a window into the story in which the world may find its salvation and hope. Logics of inclusion and exclusion are shattered in the event of reconciliation. There’s a politics in these wider horizons that can heal the bitter contempt that marks our present situation. And sure, Bonhoeffer’s conclusion may strike some as trite sentimentality, of veiled Christian piety that belongs anywhere but politics or the public square. But that’s precisely it.

The Christian story creates a public with its own politics. And this doesn’t mean the church is a counter-society, set up against the world, rather, it is precisely in our participating with fellow citizens in the mess of political process where such a witness can be given and made. There is a free responsibility to this presence. This is not Christian dominance, Christendom 2.0, or MAGA visions of authoritarian power dressed up in Christian rhetoric. This is something more modest, and yet deeply radical.

A decade of MAGA ought to have taught many of us much more than we currently know. And such learning can only happen once we stop incentivizing and normalizing assaults on democratic machinery that come to us as a spectacle for our consumptive entertainment. There remains a way to stand firm, a way that resists necessities and immediacies, primarily because it has the audacity to confess the truth that the world is already reconciled, it just doesn’t know it yet. And nowhere is this ignorance more concentrated than in the retributive, ascendant vision contained in the phrase, “Make America Great Again.”