Britain

What Exactly Is Your Fair Share?

Samuel Hooper2 Comments

Tax Fair Share Flat Tax

 

As every British taxpayer knows, this week the coalition Conservative/Liberal Democrat government will announce its budget for the coming fiscal year. And as usual, there is much speculation about what bold, eye-catching new initiatives will be announced, which favoured groups will receive the best and most insulting handouts (10p per week increase for those on the state pension, anyone?) and which of our cherished vices such as smoking or drinking will be slapped with the biggest tax increases to raise money to pay for it all.

But probably the biggest pre-budget story at the moment concerns the speculation that the government is poised to repeal the last Labour government’s spiteful, punitive, ugly and counterproductive 50% top marginal rate of income tax which they imposed just before being booted from office, either eliminating it entirely in a stroke or reducing it to 45% as the first step of a phased elimination.

Cue much indignation, huffing and puffing from the British left, who talk all the time of the importance of “the wealthy” or “the rich” paying “their fair share”.

Their fair share. What exactly does this phrase mean? It is grotesquely overused in British political and fiscal discussions at the moment, by both left and right. It is used by the left as an attack – “taking benefits and tax credits from hard working people while never asking the rich to pay their fair share!”-  and by the right as a defence – “ensuring that we are all in this together, and that those who can afford the most pay their fair share”.

So what is fairness when it comes to tax policy?

You could argue that since we all live in the same country and benefit from the same infrastructure, public services and national defence, the total bill for government spending should be divided equally between all people of a working age in this country. We can all avail ourselves of the public schools, the National Health Service and the roads in this country, so we should all pay the same toward their continued existence. So what if you’re on minimum wage and your tax bill for the year is greater than your income? Well, everyone has to pay their fair share, so better get a second, third and fourth job if you want to pay your tax bill and still eat. Otherwise it’s not fair to everyone else.

You could argue that some people use certain public services a lot more than others, and that aside from the national umbrella of national defence it is not fair to make any two people pay the same amount if they use different services, and that the best thing to do is to abolish the majority of taxes and move toward a pay-per-use scheme. So what if you’re on minimum wage and you don’t have the money you need to see the doctor? Too bad, you’ll have to make your own arthritis medicine yourself out of pressed flowers and tree bark.

You could accept that those who have been financially successful and/or fortunate should shoulder a greater burden of government spending in real terms, but that to ask them to pay a larger proportion of their incomes just because they are rich is offensive and unfair, and in this case you would support a flat tax system, where everybody pays the same rate. Everyone then gets access to the public services that they need, and everyone pays the same percentage of his or her income to support those services. Perfectly fair, no?

Alternatively, you could accept the premise that those with greater incomes should pay a higher proportion of that income in tax, in addition to paying more purely in real terms. And that’s pretty much the system we have in place here and pretty much everywhere else in the western world, a stepped, progressive tax system. If you earn little to no money you pay little to no tax either in real terms or as a percentage, and as your income grows, so does your tax liability. A lot of people think that this is fair.

My point is that each of these solutions can be described on one way or another as being “fair”. The word doesn’t really mean anything on its own, it is only given meaning through the context in which it is used, which is entirely based on your political beliefs. But in British political discourse it is always used to mean, in some general fuzzy way, that “other”, “richer” people more prosperous than us than us should pay more to cover all the bills. It is used lazily to impart a pious aura of nobility to demands for what are already significant transfers of wealth from the rich to the poor in this country at best, or counterproductive and demotivational daylight robbery at worst.

Under the present tax code in Britain, if you earn more than £150,00o in income in a given year, each additional pound you earn above that level to infinity is taxed at 50%. The income you earned between about £40,000 and £149,999 was taxed at 40%. And this doesn’t include the other huge tax-in-all-but-name, National Insurance, which means that many people earning much over £70,000 pay marginal tax rates greater than half of each additional pound that they earn. A yearly salary of £70,000 may sound like – and be – a lot of money, but if you are a family on a single income with several children, living in the South East, you’re not exactly the Monopoly Man. What’s fair about asking for more than half of that person’s hard-earned pay rise in additional tax contributions?

In order to win Liberal Democrat approval to cut the top rate of income tax down from the punishingly high 50% level, the Conservatives will doubtless have to make a number of concessions. Some of these may yet be sensible, such as moves to shift the burden of tax away from earned income (i.e. more ‘productive’ money) and more toward unearned income and wealth. This would help to ensure that income is reinvested in the economy, though whether it is the role of government to meddle in this way is not entirely clear. Some of the other concessions will doubtless take the form of yet more envious, baseless pokes at the rich. It is probably worth the government’s while taking most of these jabs in good humour in order to ensure the repeal of one of the highest marginal tax rates in the western world, a huge dampener on British competitiveness.

But whether the top rate drops down to 45% or back to 40% where it has been since Margaret Thatcher’s day, prepare for a lot of noise from the left and a lot of opportunistic point-scoring from the Labour Party. Be assured that these talking points have already been written and are waiting to be deployed as soon as George Osborne stands up at the despatch box in the House of Commons to read his statement. We will hear that he cares only about looking after his rich friends and is not concentrating on doing anything for the poor (because, of course, the government can only ever have one priority at a time, the rich OR the poor, and a policy that ostensibly benefits the rich could never also benefit the economy as a whole, and therefore everyone who works in it – and no, I’m not talking about “trickle-down economics”). We will see every rhetorical trick under the sun being deployed to convince the population that now is the wrong time to be focusing on “the wealthy few” when “the hard-working majority” are suffering. So expect all of this, and more. But regardless of the merit of these individual arguments, they all miss the point by a country mile.

Are there a myriad of loopholes in the current tax code that need to be closed? Absolutely.

Do further efforts need to be made to clamp down on tax fraud, and make tax avoidance more difficult? Sure.

Do we need to look again at tax rules for non-domiciled individuals, in terms of their income and property taxes? Almost certainly.

So let’s press for the government to include such measures in the upcoming budget.

But please, let us separate these issues – and the plight of the multi-millionaires and billionaires and bankers and premier league footballers that we hear about in the newspapers – from the doctor or accountant who maybe earns £200,000 a year and who now doesn’t want to take on that extra patient or new client because she is worn out, working hard trying to get ahead and to pay her “fair share” to an insatiable country.

On Freedom Of Religion

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I have only one further comment to make on the topic of gay marriage and religious freedom for now, this time prompted by another article in the Daily Telegraph:

http://www.telegraph.co.uk/news/politics/9145759/Church-powerless-to-stop-same-sex-marriage-even-if-hundreds-of-thousands-object.html

The article discusses the publication of the British government’s “national consultation document” (no, I don’t know what one is and have never heard of one either, but I’m sure that its publication kept an army of civil servants and several retired, titled former judges well-occupied and remunerated for some considerable period of time, as all lengthy British enquiries seem to do).

The gist of the article that even if hundreds of thousands of people object to the legalisation of gay marriage, it may still go ahead (and it is implied, of course that this would be a terrible thing, because apparently we like the tyranny of the majority – or enthused minority, in this case – in this country, as long as it is working in our favour).

However, one sentence in the article struck me as particularly important and much overlooked:

“The document repeatedly underlines that the change would only affect civil marriage and that there would be an outright ban on same-sex marriages [in] religious premises even if some denominations wanted them.”

Do you understand this, stalwart defenders of “traditional values” and “religious freedom”? Even in the government’s new proposed law, it would be illegal for your church, synagogue or mosque to perform a same-sex marriage even if it wanted to some day. The government is dictating what you can and cannot do within the confines of your own church.

In this case, your view and that of the government are broadly in alignment, believe it or not – neither of you want same-sex marriages to take place in religious spaces. The only argument concerns whether you should be allowed to continue to impose your definition of marriage on the general, non-religious population through the institution of civil marriage. But some day in the future your interests may diverge, and the government may choose to legislate something directly impacting what goes on in your holy place that you profoundly disagree with.

They have the power to do it now, and as this “national consultation document” shows, they are doing it now, but you say nothing because your interests are aligned. But I don’t want to hear a word of complaint if ever a government law is proposed that actually makes your church do something that it doesn’t want to do.

That would be a violation of freedom of religion. Not the legalisation of civil same-sex marriages.

Married Couple Or Just “Profound Friends”?

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I didn’t go to Mass last weekend because I knew that all of the Catholic churches in Britain were going to read to their congregations a pastoral letter from the Bishops, exhorting us to fight against the government’s plans to legalise gay marriage in the UK. I don’t have time for that nonsense, and I don’t much care if this puts me at odds with official church teaching, because in 100 years’ time the church will agree with me. People that accept gay marriage and contraception will be looked back upon as latter-day Copernicuses, and those who frown upon it will be looked upon much like the Antebellum South. That’s just how it is, huff and puff about traditional values all you like.

I’m used to seeing cringeworthingly anti-intellectual arguments against gay marriage from my church, but this latest one from the Most Reverend Vincent Nichols, Archbishop of Westminster, really takes the cake:

http://www.telegraph.co.uk/news/religion/9147559/Gay-couples-are-just-lifelong-friends-says-Catholic-leader.html

Gay couples are, apparently, just lifelong friends who somehow got confused or duped into incorporating a romantic element into said friendship. Says the Bishop:

“I would want to say to them that I understand their desires, that I understand their experience of love is vitally important in their lives, but I would want to say to them that they are called in my view, in the Church’s view, to a very profound friendship in life … I would want them to be respected, but I would want them to have a vision in themselves that what they are called to is not marriage but a very profound and lifelong friendship.”

Good, well that’s sorted then! No need to continue this argument about marriage equality because gay and lesbian people are just good pals who got a bit confused after a few drinks.

Sigh.

The Daily Telegraph has a poll on the subject, which, as is so often the case, misses the point entirely:

It is not for Daily Telegraph readers to decide whether gay marriage in churches should be allowed. That is a matter that does, and should always, remain with the various religions and denominations. No one is suggesting that Vincent Nichols be frog-marched to the altar of Westminster Cathedral and made to bestow the Catholic sacrament of marriage on a gay couple. As long as the official church position is that homosexual unions are a sin, clergymen should and must not be required to violate their churches teaching in such a way.

However, neither does any one religion, church or denomination have the right to impose their particular standards for marriage – or dietary customs or anything else – on the population as a whole. The Catholic church can object to gay marriage and ensure that no such unions are sanctioned within the church, but beyond that it has no authority, spiritual, moral or otherwise, to lecture other people. And any claims to the moral high ground are roundly rebuffed by their tolerance of civil heterosexual unions, and their deafening silence on the topic of extra-marital affairs and the astonishingly high divorce rate.

I’ll leave it to Nick Herbert, the UK government Home Office minister to have the last word in this case:

“I don’t seek to dictate to the Archbishop what happens inside his Church, what standards he sets and what he seeks to do. It would be quite wrong for me or the state to do so. But equally I wonder why he should seek to dictate the institution of civil marriage outside of his Church which is not a matter for the Church.”

Amen.

Labour Party Balderdash On Jobs

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Ed Miliband Jobs Guarantee

 

Good news, everyone. Ed Miliband has solved the youth unemployment crisis in Britain. I guess he was lying in bed last night and the ghost of Michael Foot visited him and told him what had to be done to make everything better again.

Once he and his merry band of super-competent cabinet colleagues are sworn in as the next government in 2015, everything will be fine. Rainbows will appear in the sky and bunny rabbits will hop across the land. We know this because, at the one-day Labour Party conference in Coventry today, Mr. Miliband unveiled his “real jobs guarantee”.

The nasty Conservative Party, of course, likes young people to be unemployed. It gives us right-wingers a kick to pay taxes so that people can receive Jobseekers Allowance indefinitely.

His plan – to give every young person who has been unemployed for 12 months or more a guaranteed internship with a company, paid at the minimum wage – would be paid for by another £600m arbitrary raid on bankers bonuses.

Miliband says:

“To business we say, we’ll pay the wages, if you provide the training … To young people: if you’re out of work for a year we’ll guarantee you the opportunity to work.”

The BBC article goes on to mention:

“Those taking part will be expected to turn up for work, as well as looking for a full-time job and complete training, or face “tough consequences” – including possible benefit sanctions.”

What other tough consequence could there possibly be for failing to turn up for work or complete the other requirements for receiving government benefits, other than to lose those benefits? Being scolded by someone at the Job Centre? Being sent a letter of disapproval? Anyway.

I almost don’t feel as though it is worth delving into the flaws in this dystopian policy, especially given the fact that Labour’s deputy leader, Harriet Harman, was apparently clueless when it came to how much the scheme would cost, and whether this cost would be fully met by their proposed one-time (but seemingly all-the-time) tax on bankers’ bonuses.

Nonetheless, a couple of points of rebuttal, just to go through the motions:

1.Guess what, not all “bankers” had a hand in bringing about the global economic downturn. In fact, a lot of people in quite a lot of industries, and government positions also had a hand in it. So when will the Labour Party get over trying to use banks as a piggy bank to raid at will to fund their latest scheme? Gordon Brown was either Chancellor of the Exchequer or Prime Minister for the decade leading up to the collapse, so how about we also arbitrarily add a 10% tax surcharge on all of his future income to help him atone for the consequences of his calamitous incompetence?

The time to extract penance from the banks was at the time of the bailouts, but it didn’t happen. The Labour government missed the opportunity. Businesses cannot plan for the future and grow and prosper if they don’t know if they will be hit by a new punitive tax at any moment to fund the latest socialist pipe dream. Should the country have extracted more of a toll from the financial sector at the time? Almost certainly. But we didn’t, and now it is too late, and we have Gordon Brown and his heirs and successors in today’s Labour Party to thank for it.

2. This policy is so vague as to be worthless. Mr. Miliband says that “saying ‘no’ is not an option”, but doesn’t outline the consequences of saying no. After never once having gotten tough before in their history, does anyone really expect that this Labour policy, if implemented, would actually have any real teeth?

3. Youth unemployment currently stands at around 22.5%, or 1.042 million people. How, exactly, is a future Labour government going to coerce enough firms to take people on in order to reduce this to 0%? The answer is, of course, that they won’t. And if they even come close, it will only be because they bully firms into taking on people to do non-jobs that are of no training value, just to help the government meet its target.

4. Go away, and come back when you have a real jobs policy or any kind of plan that will actually solve the problem of youth unemployment. And in the meantime, perhaps stop demonising the current government’s “Welfare to Work” plans, which are much more cost-neutral and much more likely to succeed.

George Osborne Must Avoid The Urge To Become A Control Freak

Samuel Hooper4 Comments

George Osborne - Chancellor of the Exchequer - Budget

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This well-written piece from The Freedom Association is worth reading, warning the Chancellor of the Exchequer to avoid raising taxes on beer in his upcoming budget announcement.

As an avid beer drinker myself, I can argue from a position of self-interest alone that it would be bad to raise the level of tax on a pint of beer.

But let’s forget about that particular issue for a moment, and concentrate instead on the ludicrous yearly spectacle of the Chancellor of the Exchequer standing at the despatch box in the House of Commons, and reeling off a list of everyday products that he intends to extract more tax from in the coming year.

Could there be a greater example of heavy-handed, over-centralised, petty, British authoritarianism than this?

Why should the central government, in addition to raiding our personal incomes and (if we are so fortunate as to have them) corporate profits or capital gains, also be allowed to decide that it wants a slice of the pie every time we buy a pint at the local pub, or a pack of cigarettes, or a bottle of wine to drink at dinner?

Is the punishingly high rate of VAT (currently 20%) paid on most goods insufficient? Are the higher (40%) and top (50%) rates of income tax not enough, or the additional national insurance “contributions” that we all make (an additional tax in all but name, meaning that the highest marginal rate of income tax is now well over 50% – why bother to work at all when the government snatches more than half of every pound you make before it even hits your bank account?)

Since the Second World War, and for some time before, government in Britain – and the raising and spending of government funds – have been far too centralised. Wouldn’t it be a wonderful thing if taxes were simplified in this country, so that there was one deduction for income tax, one for VAT, one for capital gains, one for corporation tax and nothing else to worry about? Forget “national insurance” and sneaky tax increases on a pint of cider here, or a pack of cigarettes there, or doubling the tax we pay for the privilege of passing through any of Britain’s dilapidated airports (air passenger duty), or any other thing that the Chancellor thinks he can extract revenue from?

If that’s an impossible pipe dream, how about restoring some semblance of a link between the stealth taxes that are raised and what that money is spent on, so that I can be reasonably sure that the ridiculous amount of tax I pay when I fly from Heathrow Airport actually goes to make air travel or general transport better in this country, rather than being added to some massive central pot and disbursed to fund a score of other schemes that I probably either object to, or don’t benefit from?

And since no government will ever do this in the foreseeable future, can we at least implement Ben Gummer MP’s idea to give each taxpayer a yearly statement, personalised for their salary and annual tax contributions, showing where their contributions are going.

And when, for example,  people buy petrol at the pump (or rather, go inside the shop to pay, because this is Britain and paying at the pump is still proving too great a technical feat for us to master in 2012), it would be nice if the receipts would show the original price charged by the company, and then the price payable by the consumer once the onerously high rate of fuel duty is added on.

Government should be transparent, open and accountable, and I for one would like to see where my money is going.