The time has come for progressive taxation

Posted: January 26, 2013 in Opinion piece
Tags: , , , , ,

The country is pretty crowded right now, and they say when Hell is full, the dead will walk the Earth…and be placed on Workfare.

So many problems are rearing their heads, and, as usual, the revenant spectre of Neoliberalism offers all the wrong solutions. Not only are the solutions not easing the problems, they are actively making the situation much worse.

Increase in VAT, bedroom tax, benefit caps, abolition of crisis loans; anything rather than collecting due corporation tax from multinationals.

Loading taxes onto the lower and middle classes to pay for a crisis caused by the super-rich is not only morally outrageous, but completely counter-productive in terms of growing the economy: these are the people who circulate the majority of their incomes around the country while the super-rich are trading assets or investing in stocks and bonds. Sometimes you just have to realise that your ideological dogma is actively decimating the income base of your own supporters. The lower and middle classes contribute the wealth of the upper percentile of earners, so it’s only logical that they would attempt to nourish their income stream in some way.

This vast income equality is not the only festering sore that needs to be addressed. While we recognise that some of the super-rich caused this problem, we also need to operate on the system which not only allowed this, but actively incentivized their catastrophic behaviour. The time has surely come to implement progressive, Pigovian taxes.

If the Right is to acknowledge that a majority are being failed by Neo-Liberal Capitalism, and a proportion of this affected population are growing ever more disillusioned with Capitalism as a just economic system, then they must act to prevent the overthrow of this system that has so enriched them by ensuring the system works once again for the majority. Pigovian taxation is surely the fairest way of ensuring a system works for the collective.

For anyone unfamiliar, Pigovian taxation is intended to correct negative market externalities, or to apply punitive tax to any activity which has a negative consequence to others. An obvious example would be that manufacturers of cigarettes or poor quality junk food would be taxed more highly, knowing that empirical evidence proves that their product costs wider society. This has two positive effects: it redistributes funds to the areas which would require extra funding to deal with the repercussions of the transactions (i.e. healthcare), and also incentivizes companies to alter their business to a more ethical and socially conscious model. Not possible perhaps for cigarette manufacturers, but junk food providers would be prompted to lower the content of sugar, salt and other fats from their product in order to reduce their tax burden.

If we applied this rigorously to financial markets, it could work much more effectively than tight regulation, because the argument against it would be wafer-thin. It’s easy to cloud the issue by claiming ‘more regulation stifles enterprise needed to revive the economy’, but can you imagine a bank CEO claiming that a tax which only applies to reckless transactions or trading of toxic derivatives was not in the nation’s interest?

The rational arguments against such a tax would be the setting of the tax rate, which would need to be a flat rate to avoid lobbying or appeals skewing the implementation, and based on empirical evidence from official bodies unconnected to Government or business.

None of this would replace proper regulation, but would stand alongside it. Imagine: a country where corporations are actively incentivized to work toward the greater good, and better funding of public services occurs when they fall short. Surely all sides of the political spectrum could reach a consensus on this, if only we could slay that Neo-Liberal zombie still thrashing around…

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