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

10 April 2024

5 min read

Will America succumb to the undertow?

A returning expat asks if an exhausted majority is, in fact, asleep.

Jared Stacy

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

A sleeping voter sits and snoozes next to voting booth.

'Which One?'

Nick Jones/Norman Rockwell/Midjourney.ai.

Dietrich Bonhoeffer famously made a decision to return to Germany before the outbreak of the Second World War. The year was 1938, and he was visiting America for a second time. Instead of taking a theology teaching position in New York that would’ve kept him above the fray of a deteriorating social world in Germany, Bonhoeffer’s sense of spiritual responsibility drove him to solidarity with the German situation.

I’ve thought about Bonhoeffer a lot these last few months as our family is making a transition back to the States during an election year. Not because I’d ever directly compare our move with Bonhoeffer’s. But because I’m anticipating the “shock” of returning to a deteriorating social world. Unlike him, our decision to return is far more modest and expedient. Still, we’re often asked by our friends here in Scotland, “why go back?”

My immediate answer is straightforward and entirely different than Bonhoeffer: we did what we came here to do. Our visas are up; I’m defending my PhD this month. But behind these questions of expediency, I do feel the weight of an existential question, one directed towards myself as much as it is towards America.

And that question is “who is going back?” Because after three years, America has changed to us as we’ve changed ourselves.

The persecution confronting white Christians in America is the soft persecution of opulence diffused in the ordinary.

With that change comes new choices and new questions that didn’t confront us years ago. Returning to America has us asking questions like, how do you talk to your school-aged kids about active shooter drills in their new school? How will we navigate the racialized social scripts that pervade not just American communities, but also American churches? How will we re-enter a job market that ties production to basic health care?

We’re bracing for the shock of going back to America. It will be more difficult than leaving ever was. Not just because we’ve changed, but also that the American situation has grown more extreme while paradoxically denying that change.

We’ve discovered that if American Christians are persecuted at all, it’s not from President Biden’s “corrupt regime” seeking to jail Trump or secure power through another “rigged election.” No, the persecution confronting white Christians in America is the soft persecution of opulence diffused in the ordinary.

As an expat returning to America, I wonder if this exhausted majority is, in fact, asleep.

Perspective changes everything. The outsider’s view of America careening towards a crisis of democracy and a social fabric rent at the seams isn’t felt as much by those who live within its social world, whose experience of the mundane obscures the poly-crisis pressing our social fabric at the seams. How did we get here?

Researchers discovered an interesting demographic cohort in American life, you might have heard of it. It’s called the “exhausted majority.” It refers to an ideological diverse cohort at the center of American life that has all but disengaged politically. Researchers began to talk about this “exhausted majority” in 2018, before the pandemic, before a less-than-peaceful transfer of democratic power. The hope was, then, that this “exhausted majority” might be mobilized to fend off polarization and extremism. As an expat returning to America, I wonder if this exhausted majority is, in fact, asleep.

What has become of this exhausted majority? In the wake of 2020, America underwent significant backlash and retrenchment. This affected churches, too. Friends who are pastors tell me churches in their communities have “re-sorted” along partisan lines. One pastor suggested the election might not divide churches this time, as much as partisan-determined churches might contribute to social division. Polarization has worked its way from the outer edges of American life to the very center. It does this work silently, mediated by our reliance on algorithms, a life conformed to and captured by digital architecture.

There’s an element of surprise here, at least for us as we return. Because what we experienced as the collapse of our social world in white evangelicalism—a world that we no longer are at home in— I’ve found is still very much active, very much automated—like survival reflexes—still providing an artificial coherence and plausible deniability amidst a deteriorating social situation.

This retrenchment and backlash creates a dangerous condition: an undertow. For so many, life goes on as normal on the surface, while democratic institutions are pulled apart beneath. America is caught in a rip current, but asleep on the surface. This undertow partly explains, at least to me, why all the talk of “the crisis of democracy” doesn’t register with many Americans.

A recent survey found that more than half of Americans haven’t heard the term “Christian Nationalism”—in spite of a flurry of academic and popular discourses on the term, often at the center of “crisis of democracy” rhetoric.

The fact is, Rome wasn’t built in a day, and it didn’t fall in a day, either. The Senate handing over power to Caesar one day didn’t do much to alter the mundane early morning routine of bread makers in Rome the next day. Tyranny dawns, but the ordinary continues. The routine of the mundane and ordinary, of bread and circuses, makes talk of a democratic collapse seem just another political game, a distraction from all the amusement that Neil Postman observed might be our death.

As we return to America, reflecting on who we’ve become and the responsibility of faith, I’ve found myself considering the difference between being fated and being holy.

Fate confronts us as necessity. The holy confronts us as something other. And this “other”—at least for Bonhoeffer—was the freedom of God. And I can think of no better prayer for the church in America in the coming years to maintain in ourselves the crucial distinction between fatedness and holiness. To not confuse the expediency of partisan games with the responsibility made visible in the light of the central claim of Christian faith in the body of Jesus Christ. The Crucified One, not the fate of Western Civilization, determines what it is to be the ekklesia, the “called out” community, both free and responsible, never fated.