Martin Sandbu writes the FT Free Lunch column, which is rapidly becoming the best feature of that paper, in my opinion. Yesterday he wrote about tax, saying:
Today's turbulent politics is in large part rooted in a feeling that the economy is rigged against large numbers of people, those we now tend to call the “left behind”. That feeling is not unjustified. One does not have to be a populist to want a fairer economy that works for everybody – indeed, if serious centrists had done a better job of ensuring this, the populists would have less success.
Spot on. I cannot argue with that. This is the malaise in British politics nailed in a paragraph.
What he went on to say was that:
One particular aspect of rich-country economies that does not work well for everybody involves their tax system.
He then offered three ideas for improving the UK tax system:
First: tax wealth, and tax it well.
I am glad I got in first yesterday. I am also pleased that he made the point that this is not just a tax on land and buildings: this should be a wealth tax.
Then he said:
Second: tax harmful things.
His implicit theory is that most pollution is paid by the wealthy. He is right, of course.
And he added:
Third: Ensure the tax structure imposes no greater burden on those falling behind than those well off.
Taking into account social security he argued that what we have are tax systems that are designed for a past social era that are now well past their use by dates. As he put it the result is:
[T]wo types of costs that the welfare state imposes disproportionately on those slipping downwards on income and status distribution steeper than it once was. One is that means-tested benefits create very high effective marginal income tax rates on people with very modest incomes – much higher than on those who earn the most. The other is the cost of incoherent and disruptive benefit payments (and non-payments) to those with irregular or changing work situations. The former cost is insufficiently appreciated because we rarely understand the benefits system as being part of the tax system. We should, and doing so would allow us to see the absurdity of levying the greatest tax slice from the marginal pound earned by those who work the hardest for the smallest rewards. The latter cost is not a tax, but it acts just like one.
His solution is a universal basic income. It's an open discussion, I know. His overall conclusion is worth sharing:
The general lesson is this: on all three counts, a dose of radicalism can make a big difference. What is more, changing the structure of taxation and seeing the benefit and the tax system as part of a whole need not entail a significantly different state share of the economy. There should be something for parties both of the centre-right and the centre-left to agree on here – and win back voter support from their respective fringe challengers in the process.
I welcome this. I do not agree with all the sentiments implicit in what is said. But then the FT gets to the point of saying we need wealth taxes, green taxes and a system that is genuinely progressive something is happening and don't knock that: tax reform needs all the friends it can get.
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He raises the problem of distinguishing between ownership of property outright and with a mortgage. This is something which LVT campaigners have failed to address. I have thought about it in the past – it’s quite hard to deal with but deal with it we must. I shall flag it up within the campaign.
Georgists generally support the idea of a UBI funded exclusively by LVT in the way Sandbu is suggesting. There is good reason for this because without LVT a UBI will feed directly into land prices, as does most public expenditure. As you know I do not support UBI because it will undermine the provision of public goods and services, but I do like the idea of Hanson’s carbon ‘fee and dividend’ tax.
Carol Wilcox says:
“..As you know I do not support UBI because it will undermine the provision of public goods and services,..”
I don’t understand that assertion, Carol.
Can you supply an explanation or useful pointer to one.
It’s not the only reason I don’t support UBI. Having heard Guy Standing speak on this, the first thing which struck me, which I had not realised before I wrote this article https://morningstaronline.co.uk/a-7d58-universial-basic-income-best-choice-for-the-job-1 is that it’s origins lie in Utopian visions, i.e. well before the existence of a welfare state.
Carol Wilcox,
Thanks for that. I don’t find it entirely persuasive.
Some of the counter suggestions seem to be just as ‘Utopian’ as you suggest UBI is.
I am however persuaded that there is only one cure for poverty and that is the availability of money.
I realise your piece was crafted for a deeply conservative audience and possibly was well received.
LVT makes a lot of sense to me, but it is not a panacea. The one thing we learn from the present government’s understanding of MMT is that just because the government has access to money does not mean it will spend it appropriately.
I think in common with most people I have heard on the subject of UBI you are not grasping the potential for a very different relationship between work and money. New labour was very keen on the supposed route from unemployment to work and thus out of poverty. It needs some much more radical thought to make that link as the new wave of working poor have discovered.
I don’t see a Job Guarantee cutting the mustard either, certainly not unless it’s harnessed to some fairly major shift in social and political attitudes. I’m tempted to suggest that it may be that JG is what could square the circle of UBI. Or vice versa.
Long way to go on this one
Andy
I like your engagement – and I appreciate Carol’s view is well reasoned
Your last comment is apposite
Richard
I think probably there has to be a combination of Job Offer, UBI, (or as I’d prefer, Universal Basic Capital) and Universal Basic Services. Meritocracy (says TH Marshall) ignores how social advantages or disadvantages shape the life chances of most people, hence UB Services have great importance.
http://www.progressivepulse.org/economics/the-real-argument-for-universal-basic-services
I remember now that the only solution seemed to be to levy part of the LVT on the mortgagee. SFAIK the UK is the only country which levies a property tax on those who do not own. And in the US the tax bill is sent to the mortgagee who passes it on to the mortgagor and is responsible for payment in the case of default. Seems sensible to me.
Indeed encouraging to see something from the Pink-un suggesting that more of the same might not be the best way to go.
You can’t beat a hiccup on the stock markets to get the grey matter churning.
Yes, agree about all that (pity he has to use the occasional weasel words still). Re wealth tax, just read Piketty’s blog in which he excoriates the French dropping their wealth tax and pointing out that the majority of wealth owned by the top 0.1% is in financial assets. Perhaps that’s where a wealth tax needs to home in on? (http://piketty.blog.lemonde.fr/2017/10/10/suppression-of-the-wealth-tax-an-historical-error/)
Piketty is right
We should start with an investment income surcharge