As an adviser to Tax Justice UK, I was invited to the Fair Tax conference in London last week. No-one really likes paying taxes, but if we are to have civilised society that provides or enables the things that we cannot provide as an individual on our own, then tax is essential. My late father, who was a professional economist, wrote a book called Public Revenue without Taxation – but that’s a story for another time.
Today, our tax system is grossly unfair, grossly over complicated and just plain gross. Yet consistently, governments fail to act and just add more complication and generally more injustice by finding easy solutions. They are afraid to be bold and just put raising taxes in the “too difficult box”.
Conservative Party leaders say that austerity has been driven by nothing more grandiose than arithmetic. Quoted in the New York Times about the need for austerity, Daniel Finkelstein said: “It’s the ideology of two plus two equals four. It wasn’t driven by a desire to reduce spending on public services. It was driven by the fact that we had a vast deficit problem, and the debt was going to keep growing.”
So conservative thinking is we have no money, so we have to cut services. Labour thinking is rather muddled but appears to want to maintain public services but is not sure how to fund it and offers a mish-mash of tax measures.
They all miss the point.
We are asking the wrong people for the money. We are not shaking the right “money tree”. It is not a question of soaking or penalising the rich. It is a question of asking those who have accumulated wealth, and seen the value go up, to return some of that wealth to the community as we all helped create it. So I say again: we all create the wealth, it just needs to be shared more equitably.
So as a result of this indecision, lack of political will, our tax system works against the best interests of the majority of the population.
OK, let us stop protesting: what could a fair tax system be like?
First, we have to accept that we all create the wealth and that the current system means that, unless we do something serious, it will continue to be accumulated by the few in ever greater numbers and economic inequality will get worse to the detriment of human society.
Once we accept this principle, designing a fair tax system is more straightforward. Tax the wealth we all help create more and tax income at the lower end less, so that there is more funds in circulation for a vibrant economy and less in storage. Plus, and it is a big plus, we reduce economic inequality and make millions of peoples lives better, less stressful and more purposeful.
- So first, raise the minimum wage to a living wage as set by the Living Wage Foundation.
- Cut income tax for those earning under £30,000, surprisingly it generates a small amount of government revenue but makes a huge difference to those forced to pay who already do not have enough to live on.
- Abolish Council Tax and Business Rates and replace with Land Value Tax which has been mooted as fair tax for well over a century (also suggest abolish stamp duty as is a disincentive for social mobility) but governments have been too nervous to make changes.
- Establish an annual tax on personal assets of say over £1m (excluding primary residence) and abolish Capital Gains Tax.
- Increase Corporation Tax but allow social offsetting where companies can reduce their tax bill if they are socially responsible – pay the living wage, respectable pay diversity, profit share, training, welfare etc
All these measures are interlinked. They are practical and effective and they are based on a very clear principle: Income for me/wealth for we.
And yes, the numbers do add up and there is certain amount of flexibility in thresholds rates and so on, but it is the principle what matters. Don’t tax people who have nothing and are clearly struggling. Tax the wealth we all help create, and put that wealth to good use on behalf of the whole nation not just the few. That’s fair.