Will Hutton is right (“Forget austerity – what we need is a stronger state and more taxation”, Comment). But do we really need to “broaden the VAT base”? VAT is effectively a tax on the level of economic activity in a way that taxing rentier incomes is not.
Switching taxation from VAT and on to the incomes of the super-rich would increase spending on reproducible goods and services and away from spending on non-reproducible assets – the latter surely a good thing, given the state of the London property market.
VAT is also the most regressive of taxes – a poll tax on living, if you will. By all means we need to rethink the nature of taxation and the state. But even to contemplate a rise in VAT is to fall in line with modern Conservative (and Ukip) thinking, viz that the state is primarily for the poor and that therefore the poor should pay for it.
Dr William Dixon and Dr David Wilson
London Metropolitan University
Will Hutton advocates both a stronger state and more taxation. A stronger state, with political commitment to pulling the country together for the good of us all, is surely needed. But in a democracy where a government has to conform to the contradictory demands of a nervous electorate, how can austerity and effective economics be brought into balance? Democracy can work in an expanding economy, producing a surplus that provides a measure of improvement for all. Nobody fixes the roof, because everyone expects a share in a boom. Conversely, austerity has no friends for neighbours.
More taxation can sound egalitarian, but democracy is very bad at holding a balance. We need investment which provides the employment that generates the taxes that a civilised society needs. Increasing taxes on people who are already willing to pay taxes will only induce people to adopt a libertarian view.
Before we start arguing for increased taxation, we need to close tax havens which both deprive the state of its income and drive up the cost of everything a civilised society needs. If democracy can’t move to a more egalitarian tax system, both civilised society and democracy itself will be forfeit. What is lacking is political will. The bottom line: tax the untaxed, invest to create jobs, bank tax revenues, reinvest for the future. Any increase in the general standard of living should be modest.
Martin London
Henllan, Denbighshire
At last, a commentator who argues for an alternative to austerity. At the founding conference of the Independent Labour Party in Bradford in 1893, one of the delegates’ first three plebiscites was to tax wealth, not income (others included to abolish the House of Lords and dissolve the monarchy) – and this is easily achievable by transferring tax from income to land. A gradual transfer to Land Value Taxation is as relevant an objective now as it was in 1893, and is arguably more appropriate given the need to redress a spending imbalance and the radical right’s bias on taxation matters with flat taxes etc.
Ronald Mackie
Leeds
The desire for big state spending simply cannot be achieved in our increasingly low-wage economy. When pay packets have to be topped up by working tax credits and other benefits, and companies can easily route profits to another European with lower tax thresholds, then decisions have to be made as to how we live within our means. We can’t spend until we challenge the international laws that underpin the status quo.
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