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
Grenfell disaster
Trauma
6 min read

Grenfell: how long should we remember?

There are good and bad ways of remembering.

Graham is the Director of the Centre for Cultural Witness and a former Bishop of Kensington.

A white building wrap around a tower is topped by a green heart and the slogan: Grenfell Always In Our Heaets.
Grenfell Tower, Summer 2024.
Rc1959, CC0, via Wikimedia Commons.

For nearly eight years now, Grenfell Tower has remained standing as a reminder of one of the most painful days in recent British history. The news that the government intends to dismantle the remains of the Tower has split local opinion. Some of the bereaved and survivors suggest that the government has scarcely consulted them. For many, the building is a tomb, still containing the memory, if not the actual remains of their loved ones whose bodies could not be recovered. They understandably fear them being forgotten when the building no longer stands as a reminder. Last year I sat in on a gathering where bereaved families and survivors of the fire told their stories in the hearing of representatives of the companies who were responsible for the cladding which caused the fire to spread. The memories and emotions are still raw and unhealed.  

On the other hand, many local residents would like it taken away, as its constant, looming presence is a painful reminder of that dark night. They also see the logic in bringing down a fatally damaged and increasingly dangerous structure that costs the taxpayer millions each year to keep from collapsing under its own weight.  

The key issue at the heart of this debate is how we remember - especially, how we remember pain. In the rhetoric around Grenfell, as with many other tragedies, we often hear calls to ‘always remember’ and that we must ‘never forget’ the wrongs done which caused the deaths of those 72 people. The Grenfell Memorial Commission, which was charged with thinking about what memorial should stand on the site of the building in future, claimed as its aim to “make sure the Grenfell tragedy can never be forgotten.” 

Such calls to ‘never forget’ are powerful. They seem a proper tribute to those who died, they ensure that those culpable are not let off too easily, and that justice is properly done. To blithely forget such horrendous evils seems an affront to justice, and a morally culpable act. 

Yet must we always remember the hurts and pains of the past? Can we imagine a future where such memories fade into the distance and no longer cast their painful shadow over our lives?  

Whether and when Grenfell Tower comes down, is yet to be determined. Yet only when we keep in mind the destination of the journey of healing can we make good decisions...

Theologian Miroslav Volf asks all these questions in his book The End of Memory. He describes good and bad ways of remembering. We can remember to cherish the dead, to learn lessons for the future, to ensure justice is done. Yet we can also remember to nurse grievances, to cling onto grudges, to imagine horrible pain inflicted on those who wronged us. Memories of wrongs done to us can imprison and define us purely as victims, never in control, always subject to the actions for others, with no agency of our own. 

Volf’s Christian faith tells him that the human race is beckoned towards a new world, in the full presence of God, of what he calls ‘final reconciliation’. It is a place where we will be captivated by a vision of the beauty and goodness of God, a vision that we only dimly glimpse in this world. He asks the question: in such a world, will we remember all the wrongs done to us? Can we imagine still clinging onto the memory of the sins and crimes that others inflicted on us? Even if that were in principle possible, would we remember all the harm done to us? And the harm we did to others? If not, which sins would we remember? Which ones would we forget? Would not such memories blight the joy that such a world would surely offer? 

Reflecting on his own youthful and painful memories of interrogation in communist Yugoslavia, and other tragedies such as the 9/11attacks, Volf imagines getting to the point where we don't forget the terrible things that others have done to us, but when we actively don't remember them. They still occupy a place in our minds but are instead relegated to a corner of our consciousness, under our control, no longer rearing their ugly and painful heads when triggered by other events. Such an ability not to remember, he suggests, is a good thing: 

 "Non-remembrance of wrongs suffered is the gift God will give to those who have been wronged."  

At the same time, Volf is careful not to imagine getting to this point too easily. Wrongdoers cannot for a moment insist that those they have wronged forget their misdeeds. Such non-remembrance can only happen when truth has been told, sins punished, and justice done. Yet when all that has taken place, that ‘final reconciliation’, Volf imagines, might even embrace the unimaginable - an ultimate reconciliation between the wronged and the wrongdoers.  

Is it possible to imagine children whose parents were killed because of the negligence and culpable cheating of contractors who knowingly put unsafe cladding on Grenfell Tower, ever being reconciled to and even embracing the perpetrators? Volf suggests we can, while recognising that this can only happen when the crime has been identified, fully recognised, repented of profoundly, forgiveness offered and accepted and the appropriate penalty paid.  

While such a process remains incomplete, the obligation to remember remains, and reconciliation cannot yet take place. But true healing from such hurts is not to be forever dominated by them, defined by them, or to live in constant enmity and resentment because of them. It is, instead, to gain the strength and ability not to remember them, not to be defined by them, and even - possibly, perhaps - to find reconciliation with their perpetrators. 

The Grenfell Public Inquiry that reported last year was an important step for the bereaved and survivors. It was not the end of the journey. Far from it. The process of enacting justice through prosecution of the guilty lies ahead. But as an exercise in truth-telling, in giving perpetrators the opportunity to own up and confess their guilt, in a truthful recognition of what went wrong, it was a vital step towards the possibility of reaching that stage when the memory of Grenfell no longer defines its victims. It opens up the possibility at some point in the future, where they might be in control of their memories rather than their memories controlling them. 

The Danish Christian philosopher Søren Kierkegaard once wrote that we humans need to learn both “the art of forgetting” and “the art of remembering”. To know when and how to do one and when to do the other is the gift of God and an art of true wisdom. 

Whether and when Grenfell Tower comes down, is yet to be determined. Yet only when we keep in mind the destination of the journey of healing can we make good decisions about such fraught and emotionally charged issues. The Tower cannot remain as it is - everyone acknowledges that . Yet it's hard for many to think about its disappearance without knowing what will replace it. Which is why plans to demolish the Tower must go hand in hand with the plans for the lasting Memorial that will stand on the site. Yet that can only happen if it serves the goal of being able truthfully to remember no longer the pain and injustice of the past.  

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