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
Gaza
Israel
Middle East
Old Testament
Trauma
War & peace
10 min read

Two years on: the tragedy and the trauma of Gaza

As the anniversary of 7th October comes round again, an ancient story helps shed a new light on this conflict

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

Split-screen on TC shows many different news channels in English, Arabic and Hebrew.
Split-screen reporting.
Al Jazeera.

It is now two years since Hamas' vicious attack on Israeli citizens at the Nova music festival. Two years later, much of Gaza lies in ruins, nearly 70,000 of its people have died, and Israel continues its campaign to rid itself once and for all of Hamas, a hostile neighbour. The spectre of antisemitism has raised its ugly head again on the streets of Manchester. Meanwhile, the world waits to see if the Trump peace plan has a chance of working. 

The world is also deeply divided on the question of who is to blame here. Is it, as the Israelis say, firmly Hamas’ fault, the result of a fanatical Islamist group, sponsored by Iran, determined to extend militant Muslim control over the Middle East in general and Israel in particular? Or, as the pro-Palestinian crowds chant, are we watching a genocide which is the inevitable outcome of Israel’s ongoing occupation of the West Bank and Gaza? Everyone is pushed to decide. As a child of a friend asked his mum the other day: “Which side are we on?” 

Yet what if we try to see this conflict in a different light - not so much in terms of blame but pain?

Echoes of the past

Of course, this is not the first time there has been war between the people of Israel and their enemies on the coastline of Gaza.

The book of Judges in the Bible recounts a series of confrontations around 3,400 years ago between the Israelites and the Philistines, who harassed and taunted the Hebrew tribes as they struggled to establish themselves in the land of Canaan (NB - the Philistines are not the ethnic ancestors of modern Palestinians, despite the similarity in name. The Romans. partly to annoy the Jews, simply decided to change the name of the region from Judaea to Palestina.)

One of those ancient stories tells of Samson, an immensely strong Israelite warrior, who kills numerous Philistines in a spree of violence lasting several years. Samson eventually marries a Philistine woman, Delilah, who betrays him into the hands of his enemies. He is captured, and his eyes are gouged out. In a final act of violence, he brings down the roof of the Philistine Temple at the height of a religious feast, killing both himself and more of his enemies than he killed in his lifetime.

The story is both a tragedy and a trauma. John Milton’s great verse drama Samson Agonistes, written around 1650, presents Samson as a tragic figure, gifted and heroic, a hero of Israel brought low into his Gazan prison by a fatal character flaw of pride and lust, betrayed by his cunning wife, and in his famous phrase, ‘eyeless in Gaza at the mill with slaves, Himself in bonds under Philistian yoke’. The tragedy ends in his final act of destruction of both himself and his enemies.

Yet besides a tragedy, this is also trauma. The roots of the trauma lie deeply hidden in the history between Israel and the various tribes that surround them. Samson is one of many dragged into a history of tit-for-tat violence which ends in this scene of death and devastation. In the story of the Bible, he is caught up in the long history of human wrongdoing – as both victim and perpetrator - that stretches right back to Adam and Eve in the garden. The result is Samson and his enemies all lying dead in the rubble of a demolished building in the heart of Gaza.

In this one small strip of land today we find two peoples living out the trauma of what has happened to them in the past. And without a new approach, the result will be the same – destruction and devastation.  

On many trips to Israel/Palestine over the past 35 years, as I listened to Palestinians and Israelis look at the same issue with such different eyes, this conflict often struck me as both a tragedy and a trauma. That sounds bleak. Yet this perspective can, despite its apparent gloom, bring a glimmer of hope.

Tragedy and trauma don’t avoid the question of blame, but they don’t start there. They start with a posture of empathy. Tragedy makes us pause before making moral judgments and instead, simply to notice and enter into the sadness, the grief of it all. When we watch the final scenes of Hamlet or Macbeth, or even the Samson story, we are simply left in silence. We don’t rush to judgment, but simply acknowledge the heart-breaking sorrow experienced by the ordinary people caught up in this. Tragedy sits with the grief and darkness, and does not reach immediately to blame, realising that real life is usually more complex and the causes of conflict more opaque.

At the same time, understanding this as trauma forces us to enter into the pain underlying the conflict. Samson is born into traumatic times with his people under attack, and ends up living out the trauma he has experienced by brutal revenge on his enemies. In a similar way, in this one small strip of land today we find two peoples living out the trauma of what has happened to them in the past. And without a new approach, the result will be the same – destruction and devastation. 

The Jewish people of today, especially in Israel, remain deeply traumatised by the history of anti-Semitism which climaxed in the Holocaust of the 1930s and 40s. A determined attempt by a sophisticated, modern European nation to systematically exterminate every single one of the Jewish race is not just a historical event but one whose ripples or perhaps better, stormy waves, reach us today. Alongside this there is the expulsion of Jews during the C20th from Muslim countries such as Syria, Iraq, Yemen, Algeria, Tunisia and Libya. For those of us who are not Jewish it is hard to imagine the impact of such a reality, not just as a fact of history but as a real danger in the future. After all, if it happened once, it could happen again. It explains why Israel has always paid scant attention to international opinion and resolutions of the UN for a ceasefire, such as the one recently called for. As the Jewish writer Daniel Finkelstein put it:

“The origin of the state of Israel is not religion or nationalism, it is the experience of oppression and murder, the fear of total annihilation and the bitter conclusion that world opinion could not be relied upon to protect the Jews. So, when Israel is urged to respect world opinion and put its faith in the international community the point is rather being missed. The very idea of Israel is a rejection of this option. Israel only exists because Jews do not feel safe as the wards of world opinion. Zionism, that word that is so abused, so reviled, is founded on a determination that, at the end of the day, somehow the Jews will defend themselves and their fellow Jews from destruction. If world opinion was enough, there would be no Israel.”

So, with such a trauma behind them, it is not surprising that when a Muslim kills Jews in a British synagogue, when rockets rain down on Israeli towns, or Hamas militants swagger through kibbutzim, shooting people just because they are Jews, it triggers exactly the memory of the trauma that they have been through as a people. What Palestinians think of as resistance to an occupation of their land, is experienced by Israelis as an echo of the desire to exterminate the entire Jewish people, in a way that sends a shiver down the spine for anyone who has lived this story.

Just like Samson and his enemies. An eye for an eye leads both to end up eyeless in Gaza.

Yet the Palestinian people also have a trauma of their own. In 1948, at the time of the creation of the State of Israel, hundreds of thousands of Palestinians were made homeless and stateless, deprived of their homes and their land, often at gunpoint, and many killed by Zionist fighters. The Arab nations did little to help, only interested in their own interests. The European nations stood by. America continue to fund Israel so that their army vastly outweighs any other army in the region, and certainly enough to crush the stones, knives and bombs of various intifadas. Their deep sense of injustice also leaves a scar, one that can continue to be used by groups like Hamas for their own purposes.

And so today when Gazans watch their cities pummelled to dust, when Palestinians are made to queue at checkpoints simply to travel from one place to another,  when land is taken through the building of a security wall, and Israeli settlements continue to get permits to build on Arab land, while it is much harder for Palestinians to get planning permission to build a new home, all this triggers the memory of what Palestinians call the Nakhba or the disaster. What Israelis see as legitimate self-defence, security measures to keep terrorists at bay and to keep their people safe, is experienced by Palestinians as an echo of their own past trauma of dispossession.

The result is that both sides end up caught yet again in a cycle of violence, just like Samson and his enemies. An eye for an eye leads both to end up eyeless in Gaza.

Yet this approach perhaps places upon us who look on, the responsibility to try to enter into the pain of the other side.

Now of course, we can argue about which trauma is the greater. We can debate the merits of each moral case, or where real blame lies. But trauma doesn't work like that. Trauma sits within the mind and the body, and spreads, overwhelming any ability to cope normally and react with a sense of proportion and balance. The effects of trauma are not deliberate or logical but involuntary. Reactions to trauma are notoriously complex and differ according to individuals. Trauma stays with individuals for years and with communities for generations.

Understanding this conflict not so much as through the lens of blame but of pain may help us understand this conflict differently. Of course, it doesn't avoid the question of blame, because terrible things have been done here. It also doesn’t deny Israel’s right to defend itself against Hamas’s attack with legitimate force. Most of us tend to lean towards one side or the other of the conflict. Yet this approach perhaps places upon us who look on, the responsibility to try to enter into the pain of the other side. And when the dust of battle settles, it perhaps promises a better way to cut the cycle of violence in the future.

Understanding this conflict as both tragedy and trauma helps us see it in a new light. And perhaps it gives us the glimmer of a hope of a way forward. The memory never goes away, but trauma victims can find ways to approach the memory of what happened to them in different ways.

The story of Samson ends with destruction and his burial in the family tomb. It ends in death. Within the long story of the Bible, however, the chaotic period of the Judges is superseded by the monarchy – the kings of Israel, the best of whom is King David – a ruler with flaws, but described as ‘a man after God’s own heart’. Beyond that, the story of David points to a later ruler also born in Bethlehem, whose rule meant not hating and killing his enemies, but loving them to the point of dying for them, thus, finally, bringing peace. It is that kind of Jesus-shaped, self-sacrificial, radical, counterintuitive leadership on both sides that can show a way out of the cycle of violence and hatred that was there in the period of Samson, and is there today.

Only leaders who are not concerned with doing whatever it takes to stay in power, nor willing to sacrifice others for their own purposes, who don’t care about personal reputation, but are willing to take the risky path of reconciliation, as I have argued elsewhere on Seen and Unseen - only this kind of leadership can lead us beyond the tragedy and trauma of the past into a more hopeful future.

The last word might come from Audeh Rantisi, a Palestinian evicted from his home in Lydda in 1948. He went on to become an Anglican priest and an activist for reconciliation between Jews and Arabs and the need for both to recognise the scars and humanity of the other:

I still bear the emotional scars of the Zionist invasion. Yet, as an adult, I see what I did not fully understand then: that the Jews are also human beings, themselves driven by fear, victims of history's worst outrages, rabidly, sometimes almost mindlessly searching for security.

Four years after our flight from Lydda I dedicated my life to the service of Jesus Christ. Like me and my fellow refugees, Jesus had lived in adverse circumstances, often with only a stone for a pillow. As with his fellow Jews two thousand years ago and the Palestinians today, an outside power controlled his homeland - my homeland. They tortured and killed him in Jerusalem, only ten miles from Ramallah, and my new home. He was the victim of terrible indignities. Nevertheless, Jesus prayed on behalf of those who engineered his death, "Father, forgive them..."

Can I do less?

 

This article is an updated version of one first published on 7 November 2023