I spoke to a group on the above theme yesterday. They were interested in ways that action could be taken to tackle the issue. These were my speaking notes:
1. Let me offer you some quick assumptions that underpin what follows:
· We live in a democracy
· We have a mixed economy and no one is seriously looking to change that
· We are open to trade, and need to be
· Inequality exists and
o According to Thomas Piketty will grow as a matter of fact if no action is taken to stop it
o Is as a mater of fact growing
o Is being assisted by various tax haven practices
· Significant inequality is harmful to the well-being of all in society, including the wealthy
· These messages are being heard
o When the IMF, World Bank and OECD all talk about the risk from inequality something is happening
o Mainstream politics is realising populist politics is driven by a dislike of growing inequality
· The opportunity for change exists
2. Tax can address inequality in numerous ways
· Directly via:
o Progressive income taxes
o Higher taxes on unearned than earned income
o The removal of the tax incentives largely enjoyed by the wealthiest - whether personally or through the companies they own
o By wealth taxation
§ Inheritance taxes
§ Capital gains taxes
§ Financial transaction taxes
§ And now wealth tax itself
o Through the the balance between progressive direct taxes and regressive indirect taxes
o The latter including VAT, council tax and many product and service related charges
o Through interaction with the benefits system
o Through a Universal Basic Income
o By repricing goods and services
· Through fiscal policy
o Running deficits benefits those who get services as a result
o But without QE it does require a payment of interest to those who lend to the government, which increases inequality (a little bit at current rates)
· Through pre-distribution
o Tax incentives can be given to reduce the highest pay and increase low pay - although we have not gone there in any significant way
· By controlling inflation
o Tax is as effective as interest rates in controlling inflation and inflation might have the greatest power to erode financial wealth
o But it can be penal on those wth low fixed incomes
3. All of this fits with my six reasons for tax
· To reclaim the money the government spends into the economy
· To ratify the value of money
· To reorganise the economy
· To redistribute income and wealth
· To reprice goods and services
· To raise representation in a democracy
4. The question then is what do you want to do?
· Tackling inequality with taxation is about many more things than most people might suspect
· So do you want to:
o Look at progressive income taxation?
§ Ways to do this can be looked at here http://www.taxresearch.org.uk/Blog/wp-content/uploads/2016/08/WealthtaxUK816.pdf
o Consider the more obvious wealth taxes?
§ Capital gains tax
§ Inheritance tax
o Actually look at a wealth tax?
o Consider alternative new taxes like my CUT (Carbon Usage Tax) which can be progressive and replace taxes like National Insurance that belong in the last century?
o Or consider a Universal Basic Income?
o Or the way that the tax system subsidises those who are best off (pension tax reliefs, charitable gift reliefs, savings incentives and so much more)?
o Consider ways the tax system could change wages? This could cover:
§ Tax reliefs for those paying the living wage?
§ The end of corporation tax relief on high pay?
o Review fiscal policy?
§ The fact is we have a tool that after centuries of use we have hardly explored because we really did not understand its relationship with money
§ Is this the time to start doing so?