The demands for tax reform after coronavirus are growing. I have been working on the whole theme of Tax After Coronavirus since near the time that the crisis developed. At present I am writing a submission to the Treasury Select Committee on this issue. They have called for evidence by 28 August.
So where to begin? This is the theme I tackle in this video? The important point is to look at the big picture.
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Quite right in what you say. The British public are backward in understanding the role of taxation in the economy and local tax offices ought to be in the business of educating their local communities on the role played by taxes. (God forbid the Libertarians in power in the country would ever allow this!)
The politicians voters elect are also amateurish or crude in their understanding thinking that both taxation and government spending can be used in an aggregate way to regulate the UK economy. Interestingly Keynes was not to keen on taxation as an economy regulator preferring targetted government spending to achieve full employment whilst maintaining price stability. Here’s Pavlina Tcherneva on the subject of Keynes’s targetted spending:-
http://www.levyinstitute.org/pubs/wp_542.pdf
The Government & HMRC are also “backward in understanding the role of taxation in the economy” and the relationship between taxpayers (and non-taxpayers who have no or insufficient taxable income) and the tax users and collectors – ie the social contract that you mention. Beyond the instrumental functions of tax – preventing inflation etc – many of us would agree that it is the social functions of tax that are most important – for example redistribution, or applying principles of fairness and equity in determining which taxes to apply and how (flat taxes such as VAT would fail this test imho).
But we have a problem. Tories, neoliberals, libertarians and their fellow travellers don’t recognise these social imperatives. Rather, they gravitate towards the “tax is theft” school. Hence the plethora of tax breaks for the wealthy.
As you say, tax isn’t about the most feathers for least hissing, it’s about constructing a social relationship where government invests in community in its widest meaning. Perhaps the task of constructing a new tax regime could be a project for deliberative democracy where citizens are selected at random from the kinds of groups you mention and assemble to think about the priorities for a taxation system and the principles that should guide it.
Richard
I think you underplay the role of taxation in ensuring inequality is not greater.
I’ve just started reading “Trade Wars are Class Wars” by Klein and Pettis , and they place inequality at the centre of economic problems , internally within countries and externally between countries.
taxation and tariff policy are both essential to consider in managing all these issues.
So I applaud looking at the bigger picture.
But ensure it encompasses the international dimension, tackling inequality and promoting wider economic welfare.
We would hope the Treasury Select committee take this view but I’m not sure they have the band width.
I am finishing a submission to that committee this weekend
Richard.
Just out of interest.
If tax is used to destroy money as in the MMT position (which I agree with), is council tax actually a tax that raises revenue for local authority or does it too destroy money?
Councils are money users
So no is the answer
Ah. This may be a source of some of the public confusion.
Local taxes do raise revenue.
Government taxes do not.
Another quick question.
When the government taxes, does it destroy bank created money as well as government created money?
My guess is yes??? In which case, knowing how much of each is being created would be an important statistic.
Yes