The UK taxes labour and endeavour too much, and land and property too little. It's time that changedby Philip Collins / May 21, 2015 / Leave a comment
Published in June 2015 issue of Prospect Magazine
The obvious thought about a book called Taxation: A Very Short Introduction is that it can hardly be short enough. Yet, Stephen Smith, a professor of economics at University College London, confounds that cynicism because he has written a very short book on taxation that I wished were longer. Even at its truncated length (152 pages), this is a clever, detailed and entertaining guide to tax policy.
If tax policy sounds dull, then politics itself is dull, because there is no better embodiment of the competing political philosophies that fought the general election than policy on taxation. Who or what to tax and at what rate? There is a lot to be said about these questions which is technical, but before they are technical, but first they are philosophical.
Taxation is a mirror in which political traditions see their own virtues. The left sees it as the state’s method of arranging fairness which is a casualty of capitalist relations. The left’s claim to moral superiority over the right, which is its willingness to correct inequality, is embodied in its policy on tax. The group of people for whom the left thinks itself the representative—the relatively dispossessed—it seeks to help through tax transfers. The right’s opposite instinct, that government is liable to be a poor diviner of individual wishes and an inefficient provider of services, leads it to the view that taxation should be light. The greater good is served if as much personal income can be kept in the household as possible. The beneficiaries of such a view, as a matter of political fact, will be people in the middle and the upper end of the income scale.
Smith’s story is drier and less political than this. He shows instead how the source of tax revenues differ between nations. Countries in mainland Europe, with welfare states that derive from the contributory principles established by Otto von Bismarck, allot a greater weight to forms of social and national insurance than the Anglo-Saxon countries. Some nations, and Britain is a notable example, take a lot of money from consumption taxes on discretionary purchases. The United States, by contrast, has no federal sales taxes at all, although some are levied by individual states.