Even the Tories are afraid to challenge the idea of tax as a system of social retribution
By Janet Daley
4:11PM BST 02 Aug 2014
Tax featured heavily in everybody’s political pronouncements last week. For all the mutual accusations and ensuing heated denials, there was very little attention paid to one of the most contentious premises of the debate. The purpose of taxation used to be to subsidise the cost of running a government. Remember that? At first, it was primarily a means of financing armies and the ambitions of kings but in advanced democracies it became a way of providing services that were understood to be in the interests of the people as a whole.
Even then, the basic principle remained: taxation existed in order to pay for things that were thought necessary or desirable. Back in the day, before tax became the chief instrument of social engineering, there was even a conception of something called a “balanced budget” in which the economic competence of a governing party was judged by its ability to keep its expenditure within the limits of its income – rather like the old-fashioned practice of balancing a chequebook.
That was before ideology took hold and gave birth to what is now known as the “tax-and-benefits-system”. From that point, taxation ceased to be a means of raising money for the functions and services that a state was obligated to provide and became a mechanism for re-ordering society or, to be precise, for exacting retribution. What began as the concept of wealth redistribution, hence the necessary conjunction of “tax” with “benefits”, has become a system of deliberate punishments.
This precept is now so widely accepted that it may seem strange even to draw attention to it. It is only when you say it out loud (try it) that you realise how very peculiar an idea it is: those who have advantages – higher earnings, more valuable assets, greater financial security – which others do not have are, by definition, social undesirables who deserve to be penalised.
Hence, their superfluity of earnings/assets/security must be available for confiscation by the state not just so that it may be spread around, but because it is morally wrong for anyone to have more (of anything) than anyone else. Taxation is not purely about ensuring equality or “social fairness” as Gordon Brown used to call it: it is about stigmatising those who have sinned against the ideal of fairness.
This taint of wickedness applies not just to those who came to their advantages through foul means – from inherited privilege or ill-gotten gain – but even to those who have worked extremely hard, or made exceptional contributions on their own merits. It is the having of wealth, even if that state is temporary as it often is in a dynamic economy, which is evil – regardless of the means by which it was acquired or the use to which it is put.
This shifting of the ground on which taxation is justified, from being a means of financing government to a system of moral penalties, is now so entrenched that it can be carried to a point of self-defeating absurdity. There are, for example, a good many Labour activists (including, I believe, the Leader of the Opposition) who would argue that the highest rate of income tax should be restored to 50 per cent even if that means that less revenue will be collected.
In other words, it is more important to punish those who earn over what is deemed to be an acceptable amount, than it is to bring in more funding for the state and its services. This will, of course, necessitate more taxation of other kinds but that is OK because taxation is in itself a social good representing, as it does, the beneficence of the state as opposed to the avarice of individuals.
This principle no longer applies only to the “rich”. The Left (and unfortunately, the Tory Chancellor) has little sympathy for those who find themselves paying higher-rate tax on earnings of roughly one and a half times the national average wage because they are, after all, relatively better-off than most.
So this is class war not just against the wealthy but against the slightly-higher-paid-than-quite-a-few-other-people. Indeed, the truly rich are globally mobile and find it relatively easy to move their capital out of the clutches of this Manichean trap in which any noticeable degree of financial success must be blameworthy. So it is the poor mugs who have managed to haul themselves one or two rungs up the ladder, the sitting ducks, who must be the new enemies of the masses.
I suggested that you utter this mantra aloud in order to demonstrate an obvious truth: you do not, and most people do not, believe it at all. Indeed, almost no one – except for Left-wing activists and self-loathing bourgeoisie – believes anything remotely like it.
Repeated opinion polling has shown that real people do not hate, or even envy, the very rich. (If anything, they regard them as faintly risible.) And they certainly do not resent, or wish to penalise, those who are slightly better off than they are. They just want to join them.
Nor would they be likely to feel that if they did succeed in joining them, they should instantly be regarded as social criminals whose increased earnings or reasonably comfortable properties could be rightfully plundered by the Treasury. This applies especially to asset taxes – like the preposterously named “mansion tax” – which would be a levy on nominal wealth which could not be realised or liquidated without devastating consequences to individuals who might have little disposable income.
Given the alacrity of all governments to take advantage of the effects of fiscal drag, any so-called “mansion tax” would soon be hitting every semi in the south-east of England. Its effects on the economy and on individual lives would be as deranging as the unchanged thresholds for stamp duty on house sales are now.
The young, it seems, are particularly sceptical of this retribution theory of taxation: they are far more likely (the opinion polls tell us) to believe that people should be rewarded for their efforts and their talents without prejudice or penalty. Perhaps the tough times in which they have come of age and their lack of sentimental post-war baggage has something to do with this but whatever the reason, it is a phenomenon which every political party will need to address. If politicians want to attract youthful voters, they will have to look beyond the Occupy movement.
How has this pernicious soft Marxism come to dominate politics again? There was a time when Labour (in its “New” incarnation) had abandoned it. Now not only has New Old Labour regressed, but even the Conservatives are afraid to challenge the idea of tax as a system of legal vengeance.
This is going to be the most important argument of the next election. At some point, the Conservative leader will have to become the actual heir to Blair, and confront it.