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
Gaza
Israel
War & peace
7 min read

Gaza-Israel: bankrupt ideas still capture too many of us

One year on, we’ve turned no pages, learned no lessons, made no progress.

Todd  is the Executive Director and Co-Founder of Telos Group. It forms communities of American peacemakers across lines of difference and conflict, including Israel/Palestine. 

A graffitied concrete border wall stands below a blue sky and dusty ground
Border wall between Gaza and Israel.

It’s the first anniversary of October 7, and we’re left with the grim task of finding a way to appropriately honor the dead, stand in solidarity with the bereaved, and mourn with all who mourn.  And we do this as we acknowledge our ongoing collective failure and the unimaginable and avoidable loss of so many innocent lives, each one with its own promise and possibility forever denied.  In the end, it’s hard to find a way to commemorate the horror of that day because it’s still going on.  We’ve turned no pages, learned no lessons, made no progress.  

Someday there will no doubt be a grand and somber memorial that tells the story of the brutal October 7 attack. The victims of that day will be remembered, the captives and their fates memorialized. And some day there will be a museum that tells the story of what many already believe will be characterized in the historical record as a genocide in Gaza. To what we already know of the massive destruction of a place and a people will be added details that will be excavated from the rubble, testimonies from the traumatized survivors, heartbreaking tales of orphans and of the destruction of entire families. Maybe these places of collective memory will offer greater context for the world in which the tragedies that created them took place, some kind of “never again” lessons to learn, and no doubt some sharp analysis of the failures that led to these days of great darkness.  If these attempts at memorialization are honest, they will hold many of us up to withering critique. We’ll be in the museums too, enduring rebuke for the indifference that led us here or for our zero-sum thinking that could only imagine a world born of and sustained by violence in all its forms.  

These are lone and lonely voices in a land besieged by brutality, dehumanization, and ideologies of ethnic and religious supremacy.  But they are not unicorns. 

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If we don't want the story to be about our blind complicity, but about our courage, we still have time to own our agency. Because this isn't over yet. We can mark this day by remembering that it will continue to be like all the others until we all do our part to achieve a ceasefire, a release of captives, and an end to support for systems of inequality and control.  In whatever ways great or small that we can, we have to reject the logic of violence and the ideologies of hatred and exclusion.  And to be active participants in cultivating in ourselves and in our communities an imagination for the way each human life is sacred and our flourishing is tied to that of our neighbors.   

We do this even as we pause and honor the innocent dead in Israel, in Gaza, in the West Bank, and now in Lebanon. We mourn with all those who mourn. But we do that with people still dying in Gaza, with millions of Palestinians still displaced, with disease and hunger rampant, with Israeli hostages still being held, with massive street protests calling for a ceasefire being ignored, with hundreds of thousands of Israelis still displaced from their homes in the north and the south, with Hezbollah rockets still falling and now with the war more fully advancing into Lebanon, with a wider regional war ever a distinct and terrifying possibility, with settlers rampaging in the West Bank with impunity, with ideological zealots setting the terms of debate, with economic catastrophe as hundreds of thousands of West Bank Palestinians have endured a year with no income, and with palpable fear among Palestinian citizens of Israel.   

The bankruptcy of the ideas that have prevailed this past year remain firmly in control and continue to capture the imagination of too many.  And yet there are those who know that violence begets violence begets violence, and that this is how we got here, not how we get out.   

I spent a day in New York City last month with four members of the Parents Circle/Families Forum, an organization made up of 700 Palestinian and Israeli families, each who have each lost a loved one in the conflict. In addition to the pain of loss they share, they also share a commitment to a rejection of the very notion of revenge and an embrace of the work of reconciliation.  Four members of this group traveled to the United States for a two-week tour to help us understand our part in their shattered and unjust reality and to let us know that there is another way if we can find the courage to pursue it.  That way is mutuality.  It is an embrace of security, dignity and freedom for all the people of their traumatized shared homeland, Israelis and Palestinians alike, in equal measure.   

Each member of this unlikely tribe has a unique story of personal loss, and as they speak, they tell of the worst day of their lives, over and over again.  But there is exponential power in the fact that these stories are told in one voice.  Two members visiting the U.S. are mothers, one Israeli and one Palestinian, who have lost children in the conflict and have been transformed by the deep realization that they share the same pain. One was a young man whose ten-year-old sister was killed by an Israeli border policeman and after some years of anger-fueled stone throwing as a teenager, he began to channel his trauma into the work of resisting occupation and violence via the collaborative work of justice, freedom and security through reconciliation.  And one of the newest members of this work is a man whose mother, an internationally recognized Israeli peace activist, was killed in a kibbutz on October 7.  He has chosen to pick up his mother’s work and devote himself to a just peace for himself and for all his neighbors, Palestinians included.  

These are lone and lonely voices in a land besieged by brutality, dehumanization, and ideologies of ethnic and religious supremacy.  But they are not unicorns. There are others there whose stories need to be told and whose work needs our support.  

My church is preaching a sermon series reflecting on the leadership and choices of the kings of biblical Israel and Judah.  Their stories are old but their inclinations to violence, their neglect of care for the poor and the widow, and their lack of concern for justice are timeless. In a recent sermon I was struck by my pastor’s observation that even those of us who have regularly engaged with the Bible all our lives don’t always know much about the kings, but we do know something of the prophets.  They are, in his words, “the ones who hold the story for God.” And in times like these,  as we descend ever deeper into darkness and inhumanity, they are the ones who share in the pathos of God, to borrow from rabbi Abraham Joshua Heschel. But they also show us the way out. Warmongers in the Middle East and here in the West are creating massive destruction. We too easily and readily live within the world created by their corrupted imagination.  We can’t ignore them. But we don’t have to listen to them. Listen to the prophets, those who hold The Story of God’s shalom, of his kingdom of justice and peace.  They are still among us.  One of our responses is to make sure we’re listening to these voices, amplifying them, and following their lead.  

As a Christian, over this past year, I have found myself being drawn more deeply into the life and the person and the divinity of Jesus of Nazareth. The deep love of the maligned and suffering, enemy-loving  Jesus, he who was accused by the religious establishment, executed by one of the great empires of history, mocked and spit upon, all for the threat he posed to those addicted to power, control, exclusion and the violence needed to enforce it all.  This is the Jesus who boldly declared liberation of the captives, vision for the blind, food for the hungry--a new kingdom of justice and mercy, of wholeness and shalom.   

None of these things I believe absolve me from acting.  Jesus is not my cop out, he’s my way out.  What if we who seek to follow him were to repent of our propensity to violence, our fascination with the zero-sum binaries we use to create hierarchies of exclusion, and our failure to demonstrate our love for God by showing love of our neighbor?  We might not solve all the problems that are destroying us but we’d at least stop contributing to them. And imagine what a more generative and healing presence in the world we would be if we joined our voices with others of different faiths and none who also believe in a world more just and whole.  I would argue that the world in all its diversity and complexity needs Christians to mark this day and this moment is by taking Jesus so seriously that we start to live out his calling to be active participants in the work of justice, healing and repair and living reminders that all are made in the image of God, violence begets violence, and the simple truth of Mother Theresa who said, “If we have no peace it’s because we’ve forgotten we belong to each other.”