So the government now has a Brexit plan having had an awayday at Chequers, and Jeremy Corbyn has made a speech that gives some direction to Labour’s view.
I don’t think so
No one seems to know where we are going on Brexit. I say stop it now and fix the fundamental problems of extreme inequality, financial hardship and falling living standards. If they had been addressed earlier, we would not be in this Brexit mess, sauntering towards a cliff edge.
The political rhetoric around extreme inequality has typically little to say about concrete proposals as to how inequality reduction can be achieved and how to help us all progress to prosperity. But some of the toughest challenges confronting human civilisation lend themselves to practical solutions hidden in plain sight. These solutions don’t require us to strike tough compromises or to unravel complex priorities. These policy ideas simply require us to think clearly and act decisively.
I propose an Agenda for Progressive Prosperity, which aims to minimise extreme inequality and create greater opportunity for all by bringing significant financial relief to the poor and squeezed middle. It is based on an inequality-busting strategy of ‘Income for Me/Wealth for We’. We keep the income we earn from our work and we share the wealth we all create more equitably. The tax system would be reformed to shift the base from income to wealth and to encourage greater social responsibility.
This could be achieved would be by abolishing income and payroll taxes for the majority of the population. About 80 per cent of income taxpayers earn under £32,000, yet the income tax they pay contributes just 8 percent of government revenue (Source: ONS). Abolishing income tax for lower earners could give up to 15 per cent pay rise for 25 million people and could inject £55 billion into the economy, increasing demand, encouraging growth and boosting jobs.
There is a very strong business case for the wealthy to invest more in the nation rather than their personal agenda. A well-educated, healthy people with an efficient and modern infrastructure is a very strong basis for a wealthy nation with opportunity for all, not just the few.
The National Institute for Economic and Social Research has assessed that a tax of 1.2 percent on net assets over £700,000 per year would generate £43bn annually for the Exchequer. That percentage could be higher and could be increased for the super wealthy, making it feasible to generate £100bn a year, or rather for the wealthy to invest that figure in their nation for the common good, rather than private gain.
By generating government revenue from wealth instead of income, we could take a major step toward minimising economic inequality. The problem, of course, is that our political leaders are not bold enough to say that those with substantial accumulated wealth should contribute more and how it could be achieved.
So an effective assault on poverty will only deliver when our government has a clear strategy and is truly committed to a practical plan of action, not just a soundbite. It seems the established parties are unwilling to present new radical ideas, which actually get to the root of the problem and would benefit the vast majority of the electorate.
The political extremes we are offered have failed to deliver. If it had been addressed, we would probably not be diverted by the Brexit debacle. It is time for radical action, not politically weak platitudes.
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This addresses a number of interlocked issues on which I claim to have well-developed positions. Broadly in agreement, I should like to take the debate further. Many points, and at the end I shall focus on a unique and radical form of wealth tax. Please bear with me Mr Burgess and others.
1. The proposal to remove from wages and income tax a third or half of the population is a very obvious one which should not be contentious. There is also the question of how far social security contributions should continue to be taken directly – in the UK, National Insurance, in many (other) EU jurisdictions onerous health and old age insurance (notably Germany).
2. It is not only the financial burden of these taxes that should be considered. Many people on moderate income, especially the small-time self-employed, are required to jump through various loops. Many find this psychologically oppressive. There are impenetrable forms, formerly tiny script with small boxes to put those of us without perfect eyesight in our place and now poorly designed and over-detailed interactive websites.
3. A person may have suffered an unpleasant, even traumatic experience a year or two ago, which they have successfully put behind them. Because of financial aspects they are now compelled by the Inquisition to recall and document those incidents. There is also the requirement, depending on the jurisdiction, to detail many minor incidental expenses. Or rather to claim on them, since the tax rate is otherwise onerous.
4. For information or for comparison with the UK: I recently moved from Germany to France. Among the fifty reasons for the move was that I found the German system of taxation etc. seriously onerous. So far my experience in France has been quite different, not perfect but much better. One can have oneself classified as a micro-entrepreneur with revenue up to 32.200 euro on which one pays only social security (health, pension) of about 22.5 percent (from memory). No need to keep records of one’s business outgoings or play cat-&-mouse on expenses as is the custom in Germany. No VAT!
5. There is one category of tax that Tom Burgess does not mention. It is VAT. One might have a discussion about the virtues or otherwise of VAT for business writ large. One measure that is also hiding in plain sight is to end VAT on personal services. This encourages the black economy; it presents a brake on legitimate and minor commerce especially between individuals; it is onerous in terms of bookkeeping for all except those commentators on newspaper blogs whose delight in life is to keep track of figures and who refuse to comprehend that what is fun and easy for them is onerous for others.
6. Putting much the same point in other terms: We have been moving towards a taxation system based in substantial part on transactions, and transactions that can be traced. Instead of a substantial tax on factory output (which would be relatively easy to police), or at the border, there is tracking of tax on even small commercial exchanges. The possibility of tracking cash flows has been enhanced by the move towards digital cash (card payments etc.). In some jurisdictions (e.g. France) there is now a prohibition on settling accounts higher than a thousand or two euro (from memory) with cash. (Interestingly, it is old-fashioned cheques that are used.) A consequence of this form of taxation is total surveillance in things monetary. A first step towards totalitarianism, or not?
7. Coming back to my proposal to end VAT on personal services. These would include hairdressing, beauty treatment and related services of personal care. To give an example. In Germany for a while I needed to have my toenails cut professionally (high-tech, or nearly!). Of a sudden the podologist (right word?) required a prescription from my doctor, who I did not have, or to pay 19% VAT on the € 30 she already received. Not her idea. Of course I’d then have to pay the doctor, in money and in time and inconvenience. I believe that you in the UK, but elsewhere too probably, have the situation where a person paying for private health care from their own pocket must also fork out high VAT on this. Or am I mistaken? And then there are complaints the NHS is overburdened…
8. But to continue: There should be no VAT on music lessons given privately (even to children) (again 19% in Germany, or else go through an onerous registration process). No VAT on waiters, i.e. restaurant services, except for on the food and the use of premises. No VAT on small gardening work. Etc. And finally, obviously, please no VAT on feminine hygiene products.
9. The EU is incapable of even getting this last item right, or generally of reversing bad decisions (the “acquis” must be preserved, cost what it will Italy, Spain, Portugal, Greece, young women, young unemployed…) The chances of reforming VAT as here proposed within the EU are as good as nil. Or wait thirty years. The EU shows itself here as elsewhere to be a closed society, an enemy to Sir Karl Popper’s vision of the Open Society. The EU as the Road to Serfdom. Hence, Tom Burgess, re “Brexit debacle” I would ask you to rethink your position on Brexit. The present UK government may be ever so incompetent and divided – and I am truly horrified – but they are only that, mistaken, not wicked. I have presented elsewhere (including briefly on Radix) proposals for a serious, deep, representative democracy as a constructive alternative to the Rotten Parliament and so-called direct democracy.
10. Now to the wealth tax. Your proposal was a bit confusing but maybe it was just an error: “The National Institute for Economic and Social Research has assessed that a tax of 1.2 percent on net assets over £700,000 per year” Net assets are not measured as an annual figure.
11. In 2015 I published an essay in my German book Klasse Verantwortung on Vermögenssteuer mit Rückerstattung – Wealth tax with refunds. Sometimes we may be very glad that there are fabulously rich people who use their wealth rather better than do civil servants. Not that I am personally content with the charitable choices a philanthropic Bill Gates has made with the profits he coerced out of me (lousy software forced on me by business)!
12. My solution takes me to an approach I outlined on Radix a few weeks back. There would be an independent commission to look into how a very wealthy person or family applied their income and wealth (please do differentiate). The commission would be obliged to grant large rebates to some payers of wealth-tax. The rebates would be based on the tax subjects’ record of supporting ethically desirable projects. The constitution of the commission – its true independence – is too much for this posting, but I do treat the principles fairly thoroughly in the book Klasse Verantwortung and will attend to a mature English language formulation in the not too distant future.
13. Coming back to VAT. When last in London I found a large expensive book in the bookshop close to the British Museum by an Australian woman which seemed to be definitive and unique. I’d have bought it, but my eyesight would not permit me to read it, it is not my core subject, and my luggage already too heavy. It compared VAT in different jurisdictions across the world and discussed “good” and “bad” VAT. It claimed that there had not been any similarly exhaustive studies. So much for economists.
Interesting idea. Do you think the EU would implement such a plan in relation to its goal of greater integration.