What We Owe Each Other

I call it the Man Case. If you’re a father or husband of a particular age, you probably have one too. Some guys have a Designated Drawer or Bespoke Basket. You know what I mean: the one place in the house that is exclusively yours, the place where you keep all your assorted bumf that is either useful for recurring man-tasks (bleeding radiators), sentimental (that ticket stub from the cup semi-final a couple of years back) or apocalypse-averting (your replica Swiss Army Knife with the built-in horse shoe stone-remover).

Last week I found myself rummaging through my Man Case, searching for a matching cuff-link, when I accidentally came across a forgotten treasure: my Widow’s Mite. Now, this is no ordinary item on the Man Case inventory. I was given it a few years ago in the Shuk, Jerusalem, by a kind Palestinian Christian who owns a market stall trading in antiquities. Technically, the ‘Mite’ is a lepton, the smallest and least valuable (Roman or Greek) coin used in the Palestine of Jesus’ day. Despite its small worth – both then and today – I was delighted to be given it. There is something particularly cool about owning something which is over 2,000 years old.

The lepton gets its generic name from the teachings of Jesus in the Gospels of Mark and Luke:

Jesus sat down opposite the place where the offerings were put and watched the crowd putting their money into the temple treasury. Many rich people threw in large amounts. But a poor widow came and put in two very small copper coins, worth only a few cents.

Calling his disciples to him, Jesus said, “Truly I tell you, this poor widow has put more into the treasury than all the others. They all gave out of their wealth; but she, out of her poverty, put in everything—all she had to live on. Mark 12, 41-44

I’ve been thinking about the story of the Widow’s Mite this week as the debate over the 50p Tax Rate has raged back and forth, following Ed Balls’ announcement that the Labour Party would re-institute the rate (for income over £150,000) should the Party be elected to government in 2015. The coalition government dropped the top rate of tax from 50% to 45% in 2013.

Much of the response to the announcement has become pretty ugly, pretty quickly. There has been the usual ‘bad for business’ rhetoric coming from the Tory Party. Then a group of Business Leaders sent an open letter to the Press, decrying the short-sightedness of the Labour Party, suggesting that this retrograde step would both put jobs at risk and would chase ‘wealth creators’ from the country to jurisdictions where their unique skills would be appreciated with a more lenient tax regime.

Now, leaving aside the fact that several of the 24 signatories to the letter have donated hundreds of thousands of pounds between them to the Conservative Party, it seems to me that this is perhaps one of the most outlandish acts of self-interest I’ve witnessed recently. Through it, we see some of the wealthiest people in the land speaking out against a relatively-modest tax adjustment (in France, the top tax rate is 75%) that is intended to help with balancing the nation’s books, in order to protect their own income.

In fairness, the opponents of the proposed increase argue that it will depress investment in the economy and therefore affect the jobs and income of the less well off. But this is an argument that is rolled out every time there’s a threat to the vested interest of the super-rich. Think that the Bankers Bonus is a bit generous? Well, it’s needed to remain ‘competitive’. But I believe this is a smokescreen. The truth is that the United Kingdom is a great place to live and to do business. It’s a stable, safe, prosperous and relatively non-corrupt society where a good standard of living and global connectedness are possible. Top Executives are not going to give it up and move abroad for the sake of five percent.

Likewise, I find the investment argument unconvincing. The idea of the ‘trickle-down’ of wealth is at best hard to prove and at worst an axiomatic Myth of the Right. It’s much more common in my view – and the current difficulty of securing Credit in the economy lends itself to this notion – that the rich tend to either put their added wealth into their (offshore) bank accounts or spend it on luxury goods, depending on how secure they feel. The following sentence is rarely heard on the lips of a millionaire: “Ah, it seems that I have an additional 5% on my income this year. I think I’ll open a cod-filleting factory in Grimsby”.

What about the claim that the reduction in the top rate actually improves the tax revenue of HMRC? This is something of an intractable and statistic-laden part of the argument, which I confess to being somewhat bamboozled by. Although, I have a sense that most others are too. The variables at stake, and the changing context of the economic climate over the last few years, plus the difficulty of predicting the response that individuals make to changes in tax rates, makes determining the causality of tax rates vis a vis revenue raised a mind-bender for the layman. Yet HMRC’s own figures do seem to suggest that, the last time the 50% rate was in place, it raised around an additional £3 billion per year in tax, and in all of the debate I haven’t heard many voices denying that the 50p rate will actually increase the revenue intake, even if only in the tens of millions of pounds.

But of course, ultimately, the debate over the top rate of tax should not be primarily determined by the bottom line of the revenue it generates, but by the principle of fairness and the connected principle of civic duty.

The key lesson that I take away from the story of the Widow’s Mite – other than the idea that all of our wealth, however big or small is actually given by and therefore owed to God – is the principle that each of us should give to each other according to our ability to give. And what else is Taxation in a democratic society, other than each of us giving to one another for the benefit of the whole?

How we share the cost of our Nation says so much about the kind of society that we want to create. If you were out for a meal with a group of friends and, when the bill arrived, you discovered that one of your friends had recently fallen on hard times financially and so could only contribute a small amount to the bill, you and the rest of your friends would club together to make up the difference. You would also have a loftier view of the contribution your hard-up friend made to the cost of the bill, even if it was much smaller than your own contribution.

This is really the heart of the matter of why the Labour Party is proposing the return to the 50p tax rate, and it’s why I support it. In our approach to taxation, we should prioritise the ideals of fairness, of civic mindedness, of compassion, of generosity and of mutuality. If the Widow can give her Mite, then I and the wealthier members of society can give ours and more.

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3 thoughts on “What We Owe Each Other

  1. Hi David, another good article, however I’m not convinced a higher tax rate is the answer and certainly mentioning France and their 75% rate doesn’t help your case. I sat next to a French gentleman on a recent flight (he owned a small pharmacutical company) and his scathing assesment of France was quite enlightening. He had just moved to Barcelona and moved his entire buisness operations along with him as a direct result of higher taxation. From what he said it sounded like many French entrepreneurs had bailed. I think it would surprise you how many businesses would up and move if they were asked to pay more. The EU is a perfect example of how corporations work. Look at Ireland and it’s boom when companies were given incredible incentives to locate in the Emerald Isle creating massive employment and massive wealth for a season. Many of these companies quickly jumped ship as soon as their proverbial “free rent” was up and just set up in the next country willing to give incentives.
    Maybe a fairer way to generate the money that HMRC so badly needs would be to actually collect all the money that is willfully stolen each year from Tax dodgers and businessmen with clever accountants. I fear that the problem isn’t that we need to tax one bracket more but that there needs to be honesty through all levels. The prevailing attitude amongst many people is one of trying to get one over on the taxman. Maybe if the tax code was simplified it would help? I don’t know David, I’m certainly not an economist but I think the Widow’s Mite points directly to the heart. Higher taxation isn’t going to solve our nations heart problem. Only Jesus can do that.

    1. Good comments again. I completely agree about tax avoidance: there is so much more that can be done by the government. If you compare the witch hunt on benefits sanctions (benefits recipients having their payments stopped for up to a year for the most ridiculous reasons, e.g. Missing a job centre appointment because they are in hospital) to the lack of action on tax avoidance (circa £70 billion each year compared with circa £1 billion on benefits fraud) then it brings the government’s attitude into sharp relief. I’m not advocating a 75% top tax rate: I actually think that’s unfair. But what we’re talking about is a 5% difference, from 45 to 50. And remember, that’s only levied on personal income ABOVE £150,000. I think that’s perfectly reasonable. The average annual wage in the UK is around £25k. At the end of the day, how much does anyone require in order to live well? I don’t think many people are going to flee the country for that.

      On the issue of corporation tax (which speaks to the issue of the Celtic Tiger which you raised), I think this is a very interesting comparison to income tax. Sure, we attract multi-nationals on the basis of reduced rates. But how long does it last? Look at Ireland now: suffering a recession that puts ours in the shade, based on a bubble of wealth, created by mortgage debt which itself was financed in part by the artificial influx of multi-nationals because of tax incentives! Where are many of these corporations now? They’ve moved on to the next low-tax bolt hole.

      I’m not arguing for a return to the Labour governments of the 1970s in which entrepreneurship really was almost taxed out of existence. But what I AM saying is that the current direction of our economy and fiscal policy over the last 10-15 years (yes, under Labour too) has been unnaturally skewed in the direction of so-called wealth creators, many of them in the City of London. As it turns out, the only people they were creating wealth for were themselves and their shareholders, very often based on highly-questionable ‘financial instruments’ which were little more than Ponzi schemes or impossibly complex computer transactions. The Banks themselves have as much as admitted that they didn’t even really know what was on their balance sheet at any given time! We have to stop being in thrall to the notion that as long as we support the wealthy elite then life will improve for all of us. I see very little evidence to back this up.

      Anyway, that was longer than I planned it to be! Looking forward to your thoughts.

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