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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. 

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Community
Culture
Generosity
Psychology
7 min read

Is empathy really a weapon?

Musk and Fonda disagree on whether empathy is a bug or a feature.
A montage shows Elon Musk wielding a chain saw, Jane Fonda flexing her muscles and Hannah Arendt smoking.
Wordd Wrestling Empathy.

You may have heard that you can kill a person with kindness, but in recent weeks have you also heard that you can bring about your own death through empathy? In an interview recorded with podcaster Joe Rogan in February, Elon Musk added his voice to a cohort of American neo-capitalists when he claimed, “We've got civilizational suicidal empathy going on” and went on to describe empathy as having been “weaponized” by activist groups.  

“The fundamental weakness of western civilization is empathy, the empathy exploit… they’re exploiting a bug in western civilization, which is the empathy response.”  

In recent weeks empathy has become one of the hot topics of American politics, but this is not the first time that Musk has shared his thoughts about empathy, and it should be noted that on the whole he is not really against it. Musk identifies, rightly, that empathy is a fundamental component of what it means to be human, and in previous interviews has often spoken often about his vision to preserve “the light of human consciousness” – hence his ambition to set up a self-sustaining colony of humans on Mars.  

But he also believes that empathy is (to continue in Musk’s computer programming terminology) a vulnerability in the human code: a point of entry for viruses which have the capacity to manipulate human consciousness and take control of human behaviours. Empathy, Musk has begun to argue, makes us vulnerable to being infected:  

"The woke mind virus is fundamentally anti-science, anti-merit, and anti-human in general. Empathy is a good thing, but when it is weaponized to push irrational or extreme agendas, it can become a dangerous tool." 

Strangely, on certain fundamentals, I find it easy to agree with Musk and his contemporaries about empathy. For example, I agree that empathy is essential to being human. Although, far from empathy leading us to “civilisational suicide”, I would say it is empathy that saves humanity from this fate. If consciousness is (as Musk would define it) the brain’s capacity to process complex information and make a rational and informed choices, then empathy, understood as the ability to anticipate the experiences, feelings, and even reactions of others, is a crucial source of that information. Without empathy, we cannot make good decisions that benefit wider society and not just ourselves. Without it, humanity becomes a collection of mere sociopaths. 

Another point on which Musk and I agree is that empathy is a human weak point, one that can be easily exploited. Ever since the term “empathy” was coined in the early twentieth century, philosophers and psychologists have shown a sustained fascination with the way that empathy causes us to have concern for the experiences of others (affective empathy), to think about the needs of others (cognitive empathy), and even to feel the feelings of others (emotional contagion). Any or all of these responses can be used for good or for ill – so yes, I agree with Musk that empathy has the potential to be exploited.  

But it is on this very question of who is exploiting empathy and why, that I find myself much more ready to disagree with Musk. Whilst he argues that “the woke mind virus” is using empathy to push “irrational and extreme agendas”, his solution is to propose that empathy must be combined with “knowledge”. On the basis of knowledge, he believes, sober judgement can be used to resist the impulse of empathy and rationally govern our conscious decision making. Musk states: 

“Empathy is important. It’s important to view knowledge as sort of a semantic tree—make sure you understand the fundamental principles, the trunk and big branches, before you get into the leaves/details or there is nothing for them to hang on to." 

What I notice in this system is that Musk places knowledge before empathy, as if existing bits of information, “fundamental principles”, are the lenses through which one can interpret the experiences of another and then go on to make a conscious and rational judgement about what we perceive.  

There is a certain realism to this view, one that has not been ignored by philosophers. The phenomenologists of the early twentieth century, Husserl, Heidegger, Stein – those who first popularised the very idea of empathy – each described in their own way how all of us experience the world from the unique positionality of our own perspective. Our foreknowledge is very much like a set of lenses that strongly governs what we perceive and dictates what we can see about the world around us. The problem is: that feeling of foreknowledge can easily be manipulated. To put it another way – we ourselves don’t entirely decide what our own lenses are.  

To graft this on to Musk’s preferred semantic tree: empathy is a means by which the human brain can write brand new code. 

In The Origins of Totalitarianism, another great twentieth century thinker, Hannah Arendt, explored how totalitarian regimes seek to control not just the public lives but also the thought lives of individuals, flooding them with ideologies that manipulate precisely this: they tell people what to see. Ideologies are, in a sense, lenses – ones that make people blind to the unjust and violent actions of a regime:  

"The ideal subject of totalitarian rule is not the convinced Nazi or the dedicated communist, but people for whom the distinction between fact and fiction, true and false, no longer exists." 

A big part of the manipulation of people’s sense of foreknowledge is the provision of simplistic explanations for complex issues. For example, providing a clearly identifiable scapegoat, a common enemy, as a receptacle of blame for complex social and economic problems. As we know all too painfully, in early twentieth century Europe, this scapegoat became the Jewish people. Arendt describes how, whilst latent antisemitism had long been a feature of European public life, the Nazi party harnessed this this low-level antipathy and weaponised it easily. People’s sense of foreknowledge about the “differentness” of this group of “outsiders” was all too manipulable, and it was further cultivated by the Nazis’ use of “disease”, “contagion” and “virus” metaphors when speaking about the Jews. This gave rise a belief that it was rational and sensible to keep one’s distance and have no form of dialogue with this ostracised group.  

But with such distance, how would a well-meaning German citizen ever identify that their sense of foreknowledge about what it meant to be Jewish had been manipulated? Arendt identified rightly that totalitarian systems seek to eliminate dialogue, because dialogue creates the possibility of empathy, the possibility of an exchange of perspectives that might lead to knowledge – or at least a more nuanced understanding of what is true about complex situations. 

When I look at Musk’s comments, I wonder if what I can see is a similar instinct for scapegoating, and for preventing dialogue with those who might provide the knowledge that comes from another person’s perspective. In his rhetoric, the “woke mind” has been declared a common enemy, a “dangerous virus” that can deceive us into becoming “anti-merit” and “anti-human.” In dialogue, those who claim to be suffering or speaking about the suffering of others might be enabled to deploy their weaponized empathy, trying to make us care about other, to the potential detriment of ourselves and even wider humanity’s best interests. Therefore, it is made to seem better to isolate oneself and make rational judgements on behalf of those in need, firmly based on one’s existing foreknowledge, rather than engage in dialogue that might expose us to the contagion of wokeness.  

Whilst this isolationist approach appears to wisely prioritise knowledge over empathy, it misses the crucial detail that empathy itself is a form of knowledge. The experience of empathising through paying attention to and dialoguing with the “other” is what expands our human consciousness and complexifies our human decision making by giving us access to new information. To graft this on to Musk’s preferred semantic tree: empathy is a means by which the human brain can write brand new code.  

In these divisive and divided times, there are, fortunately, those who are still bold enough to make the rallying cry back to empathy. At her recent acceptance speech for a Lifetime Achievement Award, actor and committed Christian Jane Fonda spoke warmly and compellingly in favour of empathy:  

“A whole lot of people are going to be really hurt by what is happening, what is coming our way. And even if they are of a different political persuasion, we need to call upon our empathy, and not judge, but listen from our hearts, and welcome them into our tent, because we are going to need a big tent to resist successfully what's coming at us.”  

Fonda’s use of the tent metaphor, I’m sure, was quite deliberate. One of the most famous bible passages about the birth of Jesus describes how he “became flesh and dwelt among us.” The word “dwelt” can also be translated “tabernacled” or, even more literally, “occupied a tent” among us. The idea is that God did not sit back, judging from afar, despite having all the knowledge in the world at his disposal. Instead, God came to humanity through the birth of Jesus, and dwelt alongside us, in all our messy human complexity.  

Did Jesus then kill us with his kindness? No. But you might very well argue that his empathy led to his death. Perhaps this was Musk’s “suicidal empathy.” But in that case Musk and I have found another point about empathy on which we can agree – one that is summed up in the words of Jesus himself: “Greater love has no one than this: to lay down one’s life for one’s friends.”   

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