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
Community
Sustainability
Wildness
5 min read

What my noisy, messy crow neighbours have taught me about how to live

We can’t control nature; we just need to become more porous to it

Joel Pierce is the administrator of Christ's College, University of Aberdeen. He has recently published his first book.

Crows caw and strut.
Meet the neighbours.
Townsend Walton on Unsplash.

Our neighbours hate our crows. I can’t blame them. The hundreds of crows that occupy the tops of the ancient pines which surround our rural manse are the noisiest and messiest residents I have ever lived near. They greet each sunrise with a din of caws and counter-caws, as if they are deeply concerned that anyone might miss this momentous daily event or the fact that it’s now happening before 5:30a.m. In nesting season, which lasts most of April and May, our car is easily identifiable in any carpark by the crusted grey spots with which the crows see fit to adorn it. Within a week of moving in, we gave up on the washing line so invitingly strung between two of the pines. Our pristine whites were too tempting a target for our crows. 

I do not attend the meetings of our local community council, but I hear whispers of what transpires there. Our crows, evidently, have been a regular topic of conversation. Multiple solutions have been proffered for driving them away. All have been tried and all have failed. Our crows cling fiercely to their homes and their determination is more than a match for any human efforts. If I have the vibe of my community right, at least some of its members feel that there’s something perverse, obscene even, about a flock of birds being allowed to upset our human right to create a serene, comfortable, and convenient habitation. Our clump of houses is surrounded by a visually stunning landscape; shouldn’t the aural landscape be equally beautiful?  

If my family does not mind our crows, it is because the treetop drama is just one more example of many natural encroachments on the house, some more welcome than others.  

Every year we celebrate the miraculous return to our eaves of house martins, home from their intercontinental peregrinations. We look forward to another summer spent watching their acrobatics and listening to their chicks in the nests an arm’s length from our windows.  

Clearing up the mess of our attic’s bats is an annual chore, one thankfully performed stoically by our church’s property convener, but there are compensations - such as the twilight shows they put on outside our living room window, performing impossible turns and reversals midair in their search for prey.  

Less welcome are the massive spiders, which are a perennial presence; the slugs, which seemed to apparate onto the hall carpet all through winter, the mice, two of whom sacrificed themselves to knock our dishwasher out of action by chewing through its hose; and the wasps who built a nest the size of a telephone box in the roof space above our back bathroom.  

Least fun of all has been what we call the Great Earwig Migrations, which have happened twice in our half-decade in the manse and which involve weeks of finding the little bugs under, seemingly, every object and on every surface.  

When we moved into the manse, we expected challenges, the high heating bills, the leaking roof, and the isolation of the countryside. What we did not expect was the experience of porousness; the shock of realising that we had so little control over what other forms of life saw fit to share our habitation with us.  

At first it felt to me perverse, obscene even, that a house, even a 120-year-old house, should be so vulnerable to incursions by animal creation. Shouldn’t our home, our space, be a haven where we can control who or what enters, who or what we feel comfortable with, and who or what we can exclude?  

If I had to give a name to this expectation, maybe it would be that of the buffered home, a play on philosopher Charles Taylor’s description of the modern self as buffered. Taylor contrasts the selves we aspire to be in modernity, ones able to control and order our bodies, our space, our lives, and our relationships so that they accord with our autonomous desires and actions, with those of our premodern ancestors. Medievals and ancients assumed porosity. Bodies were subject not just to biological infection, but spiritual infections too. Projects and plans were frustrated not just by mistakes or personal failings, but by the ever-fickle whims of the goddess Fortuna. Their lives, their bodies, their homes, existed in a perpetual state of vulnerability. The threat of everything falling apart was always on the horizon. 

We want nature to survive, flourish even, but not at the cost of our comforts or our sense of autonomy and security.

Modern technology has helped us tame the more unwelcome of these forces, but it has also given us an overly naive expectation that all that is inconvenient about nature can and should be gradually eliminated. This expectation frames the way we respond to worries about climate change and other creeping environmental crises. We want nature to survive, flourish even, but not at the cost of our comforts or our sense of autonomy and security. But as our ancestors might remind us, we are part of nature too, and, just as in any relationship, mutual vulnerability and sacrifice are needed if we are all going to survive. This is scary, but there are resources within Christianity - within other faiths too - to help us understand that there are benefits to affirming our vulnerability, our porosity. 

My daughters love our crows. They point in wonder as the crows flood into the sky at dusk, hundreds of them making a giant circle once, then twice round the garden, before settling down for the night. When, in late May, grounded fledgings appear, bundles of feathers shocked at the sudden inhospitality of the nest, too stunned to realise they can fly home, my daughters watch over them, anxious lest the local cats take advantage of their bewilderment.  

A few Sundays ago, my youngest, who struggles to stay quiet and well-behaved in Sunday School, pulled me out of church early. We sat on the church lawn staring up at the crows and soon were adapting the andante melodies of that Sunday’s hymns into imagined songs of praise that crows might sing. “No,” my youngest said, simpatico with the crows as she is, “I think they’d want something more upbeat.” And so we tried setting our own corvid-themed praise lyrics to Rosé and Bruno Mars’ song APT, while listening to the caw and counter-caw above. “Dad, how do you think God sees the world?” she asked me when we finished. I stumbled through my best theologically informed explanation of how God could be in every part of creation without being of it, before she stopped me. “I think it’s like a giant snow globe that he holds in his hands.” Watching the birds swirl around us, two stationary figures caught by the same currents of air that were sweeping them aloft, what could I do but agree? 

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