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. 

Review
Care
Community
Culture
Film & TV
5 min read

Amandaland's portrayal of falling social standing is spot on

What happens when motherhood is no longer rich, powerful, and terrifying.

Beatrice writes on literature, religion, the arts, and the family. Her published work can be found here

On the sidelines of a pitch a well-dressed mum hands a coat to a sceptical looking mum beside her.

Nobody likes mums. Not really. We talk about our kids all the time, we’re bossy, we’re interfering, we’re no fun. The stereotypes abound. Not even mums like other mums. We should help each other, but we often end up mercilessly judging each other instead. If you work, you’re a cruel, neglectful mother; if you’re a stay-at-home mum, you’re lazy, weak, and probably boring.  

Even worse than being disliked, though, is not being taken seriously. I thought motherhood would bestow a certain level of respect, a kind of admission, from society at large, that if you can keep a human being alive – let alone several – you must be somewhat competent at least. I can now see that’s only the case in older motherhood, once your children are grown up and you can prove to the world that you did, in fact, do a good job of raising them. Before then, while your kids are still loud toddlers or moody teenagers, being a mother is a decidedly low-status affair.  

That’s exactly what Amandaland, the new Motherland spin-off, gets right. In Motherland, the original show, the character of Amanda is a confident, terrifying alpha mum, a modern anti-heroine and a foil to the frazzled, overwhelmed protagonist Julia. As a stay-at-home mum, Amanda holds on to her high social status by a combination of displaying her husband’s wealth and a careful strategy of putting other mothers down at every possible occasion. 

By the end of Motherland, however, Amanda is lost: she opens and very quickly closes a lifestyle shop, she’s about to lose her house in the divorce, and her ex-husband is about to remarry. She’s not quite so terrifying anymore; she’s more human, more fragile. Her insecurities begin to show. 

It’s only in Amandaland, however, that her alpha-mum persona fully breaks down. She’s had to downsize and – gasp – move from Acton to a less affluent part of London; her ex-husband is refusing to pay for their kids’ private school or for her car; she has no career and no prospects. While materially still more privileged than many, in the eyes of society she’s lost any claim to admiration.  

As she meets a host of mums and dads from her kids’ new school after her move, it’s obvious that Amanda is trying to conceal this drastic change. She refers to all the furniture which she’s hording from her old, much bigger house – in her mother’s garage – as ‘curated items from my style archive’. When her mother nudges her to get rid of said ‘curated items’ in the school’s car boot sale, she deflects by declaring, in a suitably dramatic way, ‘I’m so ready to streamline all these investment pieces’. In the next episode she starts showing off, at her kids’ football practice, that ‘this big-shot interiors firm just begged me for a meet at their flagship store’. What she means is that she’s got a job interview at a kitchen and bathroom showroom. Which job she does get, by the way, and proceeds to refer to it for the rest of the show as her ‘collab’.  

I said that nobody likes mums. I should have said, more accurately, that most people don’t find caregivers interesting. 

There’s a reason Amanda speaks in cringeworthy euphemisms half of the time, and it’s not because she delights in being irritating. It’s because she’s feeling the full force of her fall in social status. We can judge her for being shallow enough to care about wealth and appearance so much. But it’s impossible for me not to feel an enormous amount of sympathy for her. I know what it’s like to see someone’s gaze at a social event drift away as you mention that you’re a stay-at-home mum. I know the agonizingly overnice look that often meets you when you say you’ve been trying to get back to work after having kids.  

And to be clear, I’ve been referring to ‘mothers’ throughout, but consciously being perceived as low status is an experience common to all primary caregivers. In Motherland, Kevin, the stay-at-home dad of the group, was often mocked and dismissed as insignificant for looking after his two daughters full time. I said that nobody likes mums. I should have said, more accurately, that most people don’t find caregivers interesting.  

There are two ways to respond to the plain fact that caregiving is seen as low status and low value, and Amanda learns both over the course of the show. The first is to realise we have an innate value that cannot be determined by social approval. We must become comfortable with being sneered at; there’s no way around it. Without spoiling what happens in later episodes, Amanda does grow in virtue by valuing status less and less, eventually rejecting the opportunity to return to wealth and high status for the sake of her family and her own integrity. 

The second way is to find fellowship. The friendships which Amanda forms, especially with the wonderful Anne, also an original Motherland character, are what save her from herself in the end. Anne and the other parents show her that they, at least, don’t care that she’s no longer rich, powerful, and terrifying. They chip away at her armour until she realises that she doesn’t need to be adored in order to be loved.  

We cannot control how people perceive us, but we can control how we respond. At the beginning of the show, Amanda’s response to the challenges of motherhood was to sink into self-absorption. In the end, she’s redeemed by the kindness of her friends. Motherhood will, perhaps, always be a thankless, low status job. But it’s also, and will always be, an irreplaceable one.  

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