Explainer
Comment
Economics
6 min read

How to tax ethically to avoid a two-tier society

From income tax to property and inheritance taxes, which is fairer?
a pile of coins.
Sarah Agnew on Unsplash.

Few doubt that Chancellor Rachel Reeves will be putting up taxes when she presents her first Budget on October 30th.  

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. 

“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.” 

Paul Williams

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 Biblical perspective that he believes offers some solutions. 

He takes as his starting point a story from the gospel of Matthew, 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, he says, “completely ruined” by wealthy people from elsewhere buying second homes, 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 said. 

“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
Comment
Film & TV
5 min read

Théoden and breaking the spell

Bernard Hill’s most famous role sheds light on where humanity needs to be.

Theodore is author of the historical fiction series The Wanderer Chronicles. He previously studied Dark Age archaeology at Cambridge, and afterwards worked in international law.

A movie scene of a king and prince walking confidently.
Bernard Hill, middle, in The Lord of the Rings.
New Line Cinema.

Recently we saw the sad passing of Bernard Hill, one of the great British actors of his generation, whose career enjoyed many high points. Hill came to prominence, in Britain at least, in the 1980s with his role as an unemployed tarmac-layer in the BBC series Boys From the Blackstuff. Through the 1990s, he went on to star in a number of big budget Hollywood feature films, such as The Ghost and The Darkness, Titanic, and The Scorpion King. But his best-known role, the one which won him global recognition, was as King Théoden in Peter Jackson’s Lord of the Rings trilogy. 

In both Tolkien’s book and Jackson’s adaptation, the character of King Théoden plays a pivotal role in making a stand against the forces of evil advancing under the banners of first the wizard Saruman the White in The Two Towers, and then the Dark Lord Sauron himself in The Return of the King, the trilogy’s climax. 

Théoden’s character arc is as heroic as any in Tolkien’s epic. But perhaps the most memorable moment within it comes when he is first introduced. Gandalf comes to Théoden’s hall of Edoras to rally support against Saruman’s rampaging armies of orcs. But instead of a redoubtable king and ally in the fight against their common enemy, he finds a weak man buckled under the weight of old age and infirmity, cowed by fear and indecision, and enthralled to the counsel of Grima Wormtongue - whom Gandalf reveals to be an agent of Saruman. 

In Jackson’s version, Gandalf ‘delivers’ Théoden from his enthrallment, in effect breaking the spell of inertia and inaction which Saruman, through his minion Wormtongue, has cast over him. Théoden awakes from his bondage, is physically rejuvenated, and is now able to rise and take his proper place in the battleline against Sauron’s evil power. In Tolkien’s version, Théoden has more agency. He chooses, at last, to throw off the counsel of Wormtongue and cling to the slim thread of hope which Gandalf represents, however desperate it may seem. 

It is a powerful image, and one from which we can and must learn today.  

Our ears are open to so many voices through both mainstream and social media that it becomes a matter of extreme importance to be able to discern who is Gandalf and who is Grima Wormtongue?

Few would deny that recent times have revealed new and determined manifestations of evil in our culture and our world. And yet, both inside and outside the church, these latter years have also been characterised by a feeling of helplessness and inaction in the face of such evil. It’s common to hear both men and women complain that they feel unable to speak up in opposition to what they perceive as wrong. They have been silenced. Either those who dare to speak up find themselves cancelled. Or else those who don't self-censor, keeping their mouths shut and their heads well below the parapet. Like Théoden, they lock themselves away in their hall. In this latter case, the battle is ceded without ever having drawn a sword. 

As the famous Edmund Burke quote goes: ‘The only thing necessary for the triumph of evil is for good men to do nothing.’ Much of the church, some might dare to say most of it, resides in this place of cowed inaction. Enthralled and confused by the Wormtongue whisperings of the media as mouthpieces for agendas diametrically opposed to the good, we have willingly subjected ourselves to this spell. And the consequence? Like the Westfold of Rohan, the land is burning. 

It is not controversial to say anyone who cares about our culture and its future needs to awaken from their slumber. Needs to cast off - or else have cast out - the gag of silence. But what is more troubling perhaps is that, even having done that, we cannot agree on what is evil and what is good. 

In the Bible, the devil is portrayed as often masquerading as an angel of light. And it warns against the descent of some cultures into a state of such moral confusion that God’s ordinances are inverted: good is called evil, and evil is called good.  

So how are we to navigate our way through this mire of uncertainty? Warnings against misinformation and disinformation abound. And yet, those in positions of power who proclaim them may equally be charged with propagating untruths and dissembling realities, all for the sake of shoring up their own power structures.  

All this is to say - our ears are open to so many voices through both mainstream and social media that it becomes a matter of extreme importance to be able to discern who is Gandalf and who is Grima Wormtongue? 

Tolkien’s choice of the name Grima Wormtongue is significant. ‘Grima’ derives from the Old Norse word, grímr which means ‘mask’. ‘Worm’ similarly derives from another Old Norse word: ormr which means ‘snake’ or ‘serpent’.  

As such, it throws us right back into the Garden of Eden and the honeyed words of the serpent which led humanity into such disaster, offering some purported good up front, while concealing the calamity (and shame) which comes hard on its heels. If we are to stand up and contest the modern manifestations of evil, we must be able to recognise the side of the field of battle on which to take our stand. 

Who is Gandalf? In Tolkien’s world, though he hated the idea of his work being interpreted as allegory, Gandalf does represent the Christ figure. And Sauron in turn suggests the Anti-Christ - a nebulous figure arising from scripture, poorly understood at the best of times. But somehow the fountainhead from which, humanity is told, all evil must flow. 

But if humanity thinks of Christ on the side of good, and Christ as the most human of us all, perhaps this provides a yardstick by which we can discern the lines of battle.  

Is it human or anti-human to stand up for life at its most vulnerable? Is it human or anti-human to stand up for the family unit? Is it human or anti-human to honour and celebrate each and every Imago Dei as they were created to be? Is it human or anti-human to safeguard a parent’s right to speak good into their children’s life? Is it human or anti-human to preserve the innocence of our young? Is it human or anti-human to challenge systems of power which enable all kinds of exploitation and other self-evident evils? 

First we must awaken. Then we must choose our side. And finally, like Théoden, we must ride to the fight. 

 

Visit Theodore's web site, and follow him on Instagram and X.