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Economics

29 October 2024

6 min read

How to tax ethically to avoid a two-tier society

From income tax to property and inheritance taxes, which is fairer?

Laurence Fletcher

Laurence Fletcher is a journalist at the Financial Times.

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

America

Conspiracy theory

Culture

Politics

9 July 2024

6 min read

When America presses in on you

A returning American feels the heat generated by contesting ‘realities'.

Jared Stacy

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

A runner passes a church and a flag in an America suburb, under billowing clouds.

Nick Jones/Midjourney.ai.

There’s a man. Running. My eyes snap into focus. Time slows - I catch his pace. Then, my eyes start widening. An odd feeling. Being forced into it. Seconds stretched out into minutes. Taking in more, looking for more, looking down that sidewalk, on a street corner in New Jersey.

Before? I was sitting there. In the backseat of my Uber. Winding our way through New Jersey. And I’m sitting there, tired, mindlessly scrolling my phone until that moment. He’s there running.

And I see him. T-shirt. Running shorts. And I’m sitting. And—a nervous flash—he’s running. Why?

And my eyes adjust, widening, scanning, checking detail, and I’m almost seized. My mind shaking itself, coming online, no more automation. My consciousness catches up: “you’re in America,” I tell myself.

Right. I’m not in Scotland. And that man is running. Here in New Jersey. In America. And I’m talking back to myself in this silent car. I’m watching him run. I’m asking why am I slowing this down? And—it flashes—“running from what?”

And I catch up to myself. To what I was trying to say, that people in America run from shooters, too. A wave crashing, sitting in the back of the Uber, and look. Now I’m really looking. Not forced. But naming. There’s other pedestrians passing him, walking. Slowing. On the other side of the street— no fast movement. No screaming. No pops.

I start breathing. I didn’t know I stopped. He’s out jogging. The automated safety check ends. The tranquility of tyranny resumes. I’m sitting in the back of an Uber. I make a note. Be more alert at the train station.

—

People ask me how the relocation back to America has been. And I don’t know what to tell them. There’s a wide gap between the visceral sense of it all pressing in on you, and more common—but also abstract—analysis.

The experience of coming back has been oddly particular. I lived in Scotland for three years, and most of it was spent studying America. From that distance, the broad strokes of American life, the larger trajectories and dangers of our shared political decisions and religious extremism, well, they’re a bit clearer.

But coming back, America presses in on you. And the only way of talking about that, maybe, is specificity. Kerouac was always good at articulating this. His America wasn’t the rise of the military industrial complex in the 50s. It was the road, the gas station on the way from Denver, it was jazz, the dim doorways of San Francisco bars. I’m thinking of Kerouac, but also Langston Hughes. Poets and artists who in their own time, held a mirror up to America, helped us move from the “I” to the “we” as Steinbeck said.

We’re all asking a version of “what’s wrong in America?” (And, do keep asking.) But to ask that question often assumes the broadest strokes, the ones that are most clear from a distance. Which means they are, in one at the same time, the most abstract.

These realities are everywhere, and no where. They are the air we breathe. They appear to the privileged as “logical” and to the powerless as “inevitable.”

Asking after democracy, after the election, and the increasingly nebulous “the church” — I’m convinced that answering “what’s wrong in America?” in the biggest of terms is leading me to (wrongly) believe that responsibility lies among the gargantuan free-floating concepts which we use to narrate our world. As if solving the “crisis of democracy” is a conceptual problem. When in reality, it is concrete, and involves more than coalition building or political activism.

Why more? Because the choices Americans have made over the last 10 years originate from imaginations which limits the scope and scale of what is possible. This is what I mean by “America presses in on you.”

Coming back to America has made this clear. I’m more aware than ever that we can produce good answers and generate compelling analysis about America without ever asking in what way these answers or analysis are sharp enough, concrete enough to puncture the bubbles of social reality in which people choose to live and in some cases are forced to live.

These realities are everywhere, and no where. They are the air we breathe. They appear to the privileged as “logical” and to the powerless as “inevitable.” They press in on us all in their own way.

In some cases, they dull our senses. We say, “as long as our Amazon deliveries continue, as long as the streaming services work.” In some cases, they don’t just press in on us, but press down and perpetuate injustice. As Dietrich Bonhoeffer asked, “where are the responsible ones?”

The visceral shock of return is ongoing. And it hits me in strange ways, on Uber rides and in worship. American life is everywhere and I’m seeing it with different eyes.

Do I care about democratic machinery? Yes. Am I concerned about whether or not the church is, in fact, the church, and not a gear in a partisan machine? Yes. But I’m increasingly convinced that responsible living in the American situation becomes most clear, most evident as we consider the large in terms of the small.

Responsibility emerges with attention paid to the concrete and intimate. January 6 is the subject of my dissertation. But before that, in the months leading up to January 6, I was a pastor just 40 miles from DC. For me, January 6 was a local event. That particularity, that specificity, is a window into a concrete responsibility.

And now, back in this same community, I found myself distracted in a church this weekend. The man in front of me raised his hands in worship, revealing a revolver hanging on his belt. What America is this? But also, what Christianity is this?

The visceral shock of return is ongoing. And it hits me in strange ways, on Uber rides and in worship. American life is everywhere and I’m seeing it with different eyes. And I wonder what it will take to break the spell of our most cherished illusions, of a certain type of freedom — one that tells us it is Christian to raise our hand in surrender to a god who we say is loving enough to save the world, but seemingly not strong enough to deliver us from our evil.

In the end, perhaps it’s best to say that it’s been proof of a good ruining. After all, we’ve experienced nothing short of a conversion, a move closer towards peace, towards hope, that unsettles all our strategies of security and comfort underwritten by violence and oppression. This is the kingdom of Heaven. Something Jesus announced that continues to unsettle and disrupt the likes of T.S. Eliot who put it well in Journey of the Magi:

We returned to our places, these

Kingdoms,

But no longer at ease here, in the old

dispensation,

With an alien people clutching their gods

I should be glad of another death.