Tax Break

Who said tax is boring?

And so this is Christmas

Exhibit A

Exhibit A

In London for a client meeting last week, I decided to take in the Oxford Street Christmas Lights on my way to the airport. While, back in the smog-filled Decembers of my childhood,  the lights adorning the length of Britain’s premier shopping street carried fairy tale themes of Hans Christian Andersen and the Brothers Grimm, this year Londoners were treated to a cosmic display of Marmite. “Merry Christmas from Marmite. You either love it or hate it”  was beamed at shoppers every few hundred yards.

At first, I thought it was a rather honest piece of marketing for a product the colour of crude oil with the consistency of vaseline and the taste of raw seaweed marinated in saltwater – a fit example of traditional English cuisine along with Pigs Trotters, Tripe and Toad in the Hole. Then, as I tossed the caption around  in my cynically-wired brain, it occurred to me that, maybe, it was not Marmite that people either loved or hated but, rather, Christmas.

Looking about me at the smiling and laughing faces of families and young couples carrying bag loads of gifts it was hard to justify that conclusion. Then I descended into the bowels of Oxford Circus Underground Station. In the concourse, a talented group of middle-aged carol singers was performing a capella version of  “Comfort and Joy” accompanied by  a pleasant Women’s Institute lady jiggling a collection box for Homeless Children. I deposited my modest sum in the slit, suspecting I heard the echo of the coins hitting the bottom, and tarried for some minutes thoroughly enjoying the informal concert. It is fair to say that at least 200 commuters passed the spot while I was standing there and NOT ONE inserted a single coin in the box. Fresh from my visit the previous day to the newly refurbished Charles Dickens Museum, not to mention a freezing walk up Shoe Lane close to where Fagin and his boys had their lair,  I thought of Ebenezer Scrooge’s exchange with the two portly gentlemen collecting for the poor. Satisfied that there were enough prisons and Union workhouses he sent them on their way suggesting that, if the poor would rather die than enter a workhouse “they had better do it, and reduce the surplus population.”

Even the National Health Service is better than this

Even the National Health Service is better than this

Of course, that is a very harsh and – in the cool, cold light of day – unfair comparison. Britain, and much of the rest of the world, is an infinitely better place to live in than in the times of Dickens. According to  blurb on the Underground advertisements, the Homeless Children are not alone in the world sweeping street crossings like poor Joe in Bleak House but they are forced to live in depressing, ever-changing temporary accommodation. Add to them the lonely elderly  who, although not condemned to the workhouse, have to get by on subsistence level state pensions, it is easy to imagine Christmas, with  its message of peace, love and goodwill to all men, as an utterly miserable time for the less fortunate.

 In the  urban, neighbourless modern world, much like Scrooge, people expect the Government to deal with the social wants of society. That is not necessarily a bad thing. The problem is that the vehicle for achieving that goal – the tax system – lacks communal ownership. That needs some explaining.

At the start of the financial crisis in 2008, the, soon-to-hang-up-his-crook, Archbishop of Canterbury wrote a brilliant newspaper article linking the crisis to the fact that credit has lost the personal relationship of  lender and borrower. Someone  borrows from a bank somebody else’s money that even the bank, having entered into a series of  complex derivative transactions against its loan book, cannot  identify. As a result, the borrower feels little guilt towards the lender for defaulting and the lender feels no compassion for the borrower’s plight.

Taxation has the same problem. Taxpayers see no connection between the taxes they are, begrudgingly, required to pay and the good they do. This is partly because they often do no good at all and partly because governments insist, for reasons best known to themselves, on behaving as if they rule the country. If governments made themselves more accountable for their taxspend, there would be a cohesive effect on society and a greater chance that taxpayers would accept tax increases where necessary.

As a responsible tax practitioner I have to stress that I am not proposing that we should all hug each other and raise the marginal income tax rate to 75% like in that Bastille of bankrupted socialism, France. The Laffer Curve would be expected to maximise government tax revenue way, way, way below that kind of rate. What is more, with all the brouhaha in America and beyond over differentiated tax rates on labour income and capital income it should be remembered that  the rate of return on human capital investment is less tax sensitive than the rate of return on non-human capital investment and there is a widespread view that if labour income tax rates are not higher than capital income tax rates there will be damaging distortions in the allocation of capital (human and otherwise) in a national economy. Furthermore, as far back as the mid-19th century John Stuart Mill recognised that tax on savings effectively represented a double tax on income already taxed once. And if you don’t believe any of this, President Wannabemitterand has discovered to his chagrin that  high tax rates drive people and capital abroad (including ,most recently, hell raiser superstar Gerard Depardieu, which proves that Christmas can still churn out its miracles).

What IS needed is, similar to the 3% budget deficit limits now imposed on Eurozone governments in Europe,  statutorily agreed percentages of government income earmarked individually for Health, Welfare of the Elderly, Child Welfare and Education. Whatever is left could continue to be spent on expensive toys that go bang-bang in faraway lands, ministers’  stretch limousines and cows suspended in formaldehyde at state sponsored excuses-for-art-galleries. Governments should also be required to provide user-friendly annual summaries breaking down to each assessee  how, based on national averages, his, her or its money was spent. If the Government foresees a shortfall of tax revenues requiring a tax increase, it should be required to announce what, precisely, the additional revenue to be raised is for.

One day

One day

Should this plan be implemented successfully there may be no more need for a lady to stand with a half-empty collection box. However, the singers must be persuaded to stay, as they are so good. One possibility would be for the whip around to be for repairs to St Martin-in-the-Fields Church in Trafalgar Square  for, if there is one thing those American Founding Fathers got right, it is that no Government cash should ever go to organized religion. I am sure Mr Scrooge would agree with me. The chiming of the neighbouring church bells on Christmas Eve drove him mad.

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One thought on “And so this is Christmas

  1. habeles on said:

    Really nice one!
    Helen

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