Saturday, February 1, 2014

Taxation and Representation

Last weekend, Ed Balls made an excellent tax announcement ahead of the general election in 2015. This announcement, popular with the public, was a commitment to raise tax – to reintroduce the 50p rate of tax for those individuals who earn £150,000 a year or more. That is, to be clear, to take 50p in every £1 earned OVER £150,000. From the squeals, one might think that it actually meant taking 50% of income as a whole. It doesn’t (more’s the pity). In the debate that’s followed, we’ve missed a discussion about where it sits in Labour’s tax package as a whole – how it measures up to our equally important commitment to reintroduce the 10p tax rate for our lowest earners.

The 50p rate of course has its nay-sayers, like the least convincing (former) Labour minister since Alan Milburn, Lord Jones of Birmingham. Lord Jones believes that: "In the last few months we've got 'if it creates wealth let's kick it', really go for energy companies, really go for housebuilding, bankers – this time it's going to be high earners. Are we talking politics or are we talking what's right to create wealth and jobs in the nation?".

What Lord Jones pompously does not understand, as he doesn’t really understand economics, is that it’s not these individuals who create most (if any) of this wealth. It’s the working people, who toil in the factories of Triumph motorcycles, who build homes they can’t afford to live in, who invent clever ways to make materials go further, who are penalised with pay-as-you-go electric meters and who pay their taxes that create most of that wealth. This tax rate is to support those people, the real wealth creators, not undermine them. 70% of tax revenue comes from basic and higher rate tax payers, not the Lord Joneses of this world.

To be asked to pay back more money, whether as an individual, or a collective, is a measure, on capitalist terms, of how successfully one has benefited from subsidy from the state and the labour of others. So be humble enough to accept the demand, and take pride in paying it – whether rich or poor.

But the 10p tax rate too has been criticised by the greedy top of the economic pyramid, claiming, as the IFS does, that we’d be better off raising the personal allowance, so they can have a slice of the pie too, and lift some people out of tax entirely. Not only does this expose the total greed of the shrinking economic elite, but also the complete misunderstanding of the purpose of tax. This purpose is as relevant to the 50p rate as it is to the 10p rate.

Far too often, whether on ‘Benefits Street’, the front of the Daily Mail or in common parlance, we kick our poorest. We treat them as having no stake in society, not paying into the system, just taking out. Of course, this is not true. They take out far less than a major corporation who is dependent on expensive legislation, efficient utility supplies, quality roads and decent education - all provided to them by the tax payer. Who takes more: the corporation and its shareholders and bosses, or the unemployed, trying to support a family, taking a pittance in benefits to keep a roof over their head and loving their children without asking for reward? The maths is pretty clear on that one.
Let’s not forget that the poorest working people have civic rights too. They have the right to have a job that pays a fair wage, to be protected from the harshest exploitation of their labour, to benefit from public subsidy when out of work, as well as when in work, and to pay tax. Yes, the right to pay tax and so to know that the system belongs to them as much as the next person. It is not true that they should be grateful for a job, dependent on tax credits or thank the benevolence of Lord Jones, whether through his charity, or through his taxes.

Moreover, let’s look at being unemployed as being denied a social right. Let’s look at it as being deprived of dignity, and deprived of a civil right– the right to pay taxes to contribute to the system that in a small way supports you. That is to see it through the eyes of the majority of the unemployed. That is why our taxes should be paid with compassion, not taken with gratitude, and used to not simply allow the existence of the underclass and subsidise success for the wealthy, but bring personal dignity through finding meaningful work for fair terms. Lord Jones should be proud that the call is being made of him to have solidarity with his fellow citizens and pay his way for a better society for all.

Lord Jones’ argument is akin to those of his predecessors who argued in 1918 that to extend suffrage to all working men and some women was to kick the wealth creators, and devalue their vote by over 40%. He doesn't understand that his stake in society is equal to that of his fellow citizens, irrespective of how well he's played the system to acquire a personal fortune. Let’s redistribute his wealth, as we redistributed his vote, and use it to create an economy that works for all; to strengthen the civic voice and economic potential of the most worthy of our citizens.