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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.

 

Events
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June 3: Esau McCaulley and Graham Tomlin - get tickets now

Join us in London as we explore today's cultural moments.
A man talks to a camera with his hands together palms up and his finger interlaced.
Esau McCaulley on the Re-enchanting podcast.

Meet Esau and us

Seen and Unseen is hosting an incredibly rare event: Bishop Graham Tomlin in Conversation with Esau McCaulley on 3rd June, at St Mellitus College, 24 Collingham Road, Earl’s Court, London starting at 7.30pm .

As well as hearing more of Esau’s story, this conversation will cover the place of faith in public life, the significance of the black church, US politics, and this cultural moment. Trust me, you don’t want to miss this. I have had a couple of conversations with Esau McCaulley, and they have re-arranged the theological air I breathe.  

You can find out more about Esau on his web site and read his New York Times columns. Or listen to my interview with him, as part of our Re-enchanting podcast.  

Places will be limited, get further details and reserve your (free) ticket on Eventbrite.

 

Belle Tindall writes...

How does one wrestle their faith out of the hands of those who used it as tool to enslave them? How does one keep hold of such a faith when the owner of the local plantation was also the pastor of the local Presbyterian church? When the people who filled the pews were also the people who turned up to the KKK rallies? And how do the descendants of those people wade through the cultural and spiritual residue of such a history? Wrestling, still, with the complex evil that defined their ancestors' days?  

And how does one respond when Donald Trump, the likely Republican presidential candidate, endorses a God Bless America Bible as some kind political strategy? What does one do when their community are being peddled their own sacred book, this particular edition of which includes the American Constitution, the Bill of Rights, the Declaration of Independence, the Pledge of Allegiance and the lyrics of a country song also entitled God Bless the USA? Oh, it also has the American flag emblazoned across the front. For good measure, I suppose.  

And finally, how does one look out at an increasingly secular culture and remain confident that what it really needs is to be reminded of an ancient Galilean carpenter, as if he’s still some kind of relevant solution to our deepest hopes and fears?  

These questions have something in common: they have been, and are continuing to be, answered by Esau McCaulley.  

Answered honestly.  

Answered powerfully. 

Answered ever so publicly.  

Last year, Esau was named by the Washington Post as one of the most influential faith leaders in the USA. He is a New York Times contributor and a New Testament Professor at Wheaton College, he is also the author of the award-winning Reading While Black and his latest best-selling memoir, How Far to the Promised Land? What began as a eulogy for Esau’s (rather complicated) father became ‘one black family’s story of hope and survival in the American south’. The eulogy was unapologetically complex, and so is this book. It was unwaveringly honest, and so is this book. It was utterly profound, and so is this book.  

Esau, when reflecting on his own history, stretches for truth, refusing to relax into comfortable simplicities or false binaries that don’t belong in reality. Writing this memoir cost Esau something. You can tell. The grace woven into the paragraphs did not come cheap.  

This book, as Esau himself explains, is about his father, but his father is a metaphor for America. And so, when it comes to this book (and much of Esau’s work), the political makes its home within the personal; the story that Esau tells is, to an extent, a trojan horse. A challenging commentary of America is sitting within this book’s pages. Esau is clear, his father – who continued to leave a trail of trauma in his wake – made bad decisions. But society played a significant role in creating the context within which those decisions were made. Were the poor decisions his father made down to personal responsibility or was it structural injustice? Esau’s answer? ‘Yes’.  

Again, he has an aversion to binaries that don’t belong in reality.  

To borrow an Elizabeth Oldfield phrase that I cannot stop thinking about: this book tells us something of our brokenness and our ‘breaking-things-ness’. And, as Esau writes,  

‘patience with broken people and broken things is a manifestation of trust in God’ 

And Esau seems to have a lot of patience. Patience with himself, patience with his father, patience with Rev. Matthew Bone, owner of the Bone planation where his ancestors were enslaved, patience with those who have hurt him, patience with us all.   

And that, it seems to me, has bred a persistence in hope. Real, gritty, bruised and yet still beating, joy-filled hope. The kind of hope that can look at the God Bless America Bible and not face-palm. The kind of hope that can research the links between Christianity and slavery and not fall into spiritual crisis. The kind that can observe the theory that faith is losing its place in public life and can use a New York Times column to prove it wrong.  

Ultimately, the kind of hope that the world is increasingly paying attention to.