Monday, August 9, 2010

Biblical taxation

For some reason, there's been a lot of coverage lately of an American politician named Michelle Bachmann, who favours a "biblical" model of taxation. "We render to God that which is God’s and the Bible calls for ... maybe 10%", she apparently says.

Since I was brought up to believe that everyone - no matter how stupid or insane they sound at first encounter - has something to teach me, it occurred to me to wonder what a Biblical tax model might really look like.

Sadly, Bachmann has it quite wrong. When Jesus was questioned about taxation, He pointed out that money bears the image of Caesar, not God, and therefore (He implied) it is Caesar's domain (Matthew 22:21); the church has no call on it at all. What one should "give to God" is "what is God's" - a definition that, given the context, is clearly meant to exclude money. Paul, ever the pragmatist, recommends that Christians should give a fraction of their income for the upkeep of their church (1 Cor 16:1-2) - but he never mentions the 10% figure. And money donated to the church is, in any case, entirely separate from the issue of paying taxes; the donation is, very explicitly, not a tax - it is something that must be given voluntarily, "not reluctantly or under compulsion" (2 Cor 9:7). The "tithe" is an Old Testament concept, where it's levied by the Temple to support its works - again, quite separately from what the state or the king demand for their works.

Clearly, in conflating taxes with tithes, this Bachmann is on very unsound ground theologically.

I can, however, think of one example in the Bible where a righteous figure is charged with managing a secular tax regime. In Genesis 41:33-49, Pharaoh appoints Joseph as first minister of Egypt, to establish a tax rate of 20% in years of plenty; the idea being that it will be doled out in the lean years to follow (making Joseph, arguably, the first Keynesian).

This tax is raised for one purpose: to alleviate the effects of famine (recession) by feeding the hungry. It does not include any allowance for defence, law and order, education, fire safety, maintenance of public roads or buildings, the Pharaoh's majesty, or any other kind of public service - those are all extra, presumably levied by a separate, parallel set of collectors. This 20% is taken purely for the purpose of redistribution.

What could we do with a regime like that?

The UK's GDP per head, today, is around £27,000 per annum. Imagine if the government took 20% of that money (only a fraction of its actual spending, of course) and simply paid it out evenly to everyone over the age of 18. Assuming one-fifth of the population is under that age, that'd be a shade over £120 per adult per week.

That's enough to live on. Not "live well", of course - you'd probably have to share lodgings, and you couldn't support much of a family on it. But enough to take the edge off poverty. No matter what happens - employed, unemployed, self-employed, retired, on holiday, in education, in prison - every UK citizen would have a guaranteed top-up to whatever other income they could get. For life.

I think that would be a Good Thing.

It would remove the poverty trap - no more losing benefits when you gain income, because all lesser benefits are simply abolished. It would massively cut down on the government-related paperwork that afflicts ordinary people (I've been unemployed, I remember it with horror to this day - and what I had to put up with, including the 90% marginal tax rate, was only a fraction of the ordeal that's inflicted on the most vulnerable people in society when they try to claim, for instance, disability living allowance). It would establish a base level of income for everyone, tied directly to national income, thus reducing inequality. It would allow us to forget about "fully funded pensions" - pension income would be, quite transparently, paid for out of current income (which is what must happen anyway, it's the only thing that makes economic sense, and anyone who tells you different is trying to sell you something). It would support rural areas and take the pressure off inner cities - honest people need not be quite so desperate for jobs. It would eliminate the state retirement age, and indeed the entire concept of "retirement" - you could stop working at whatever age you felt you could afford it, and change your mind at any time later, with no repercussions and no paperwork.

So how, specifically, would we go about paying for the Universal Benefit?

For starters, it's considerably more than the current jobseeker's allowance, or the basic state pension (even including the winter fuel allowance), or disability living allowance, carer's allowance, child benefit, maternity benefit... So we could scrap all of those - basically, reduce the Department for Work & Pensions to a rump department charged solely with keeping track of who's still alive and what bank account they want their money paid into. That would save about one-sixth of the entire government budget, or over 35% of the money needed, without levying a penny more in taxes.

Second, the Universal Benefit itself would be taxable. So while the poorest get the full £120 a week, a top-rate taxpayer would get only £72 (my tax rates may be a shade out of date, but never mind that for now). Let's call it, to a reasonable back-of-the-envelope level of precision, another 25% of the cost clawed back directly from taxpayers at present rates.

The remaining cost to be charged in a direct tax amounting to 8% on all UK incomes. Since the money we're still looking for is (40% of 20%) of national income, it follows that 8% of national income would fill the gap. Of course there's still the zero-tax band (below, say, £10k), so the actual rate for those paying would have to be a bit higher - say, 9-10%. We could call it "national insurance contributions", and no-one would even notice the difference.

Who'd've thunk? It turns out that Bachmann has a fantastic idea. All that's at fault is her reading of the Bible.


M said...

Nice post and excellent points. I've stopped conversations in their tracks when I suggest that Americans should give up the tax deduction for charitable giving. Why should they pay less tax simply because they give to their church or other charity? Is it really a "gift" then? I feel so alone on this issue.

vet said...

Morally speaking, that's an excellent question. The answer I've heard in the past is that in practice people won't give to charity unless they can feel they're getting good value for it. In other words: they're basically not very generous.

You may be interested in this article from The Economist, which suggests that - contrary to popular wisdom - poor people are actually more generous than the rich.

bahumbug said...

Charitable giving vs tax isn't an all-or-nothing thing. I just factor it straight in: treat it as government making a donation alongside mine. Indeed our tax regime does that, under the "gift aid" label. In another variant of the theme, some employers will match donations by employees.

Government gives similar tax breaks for some other things it wants to encourage: for example, venture capital (without which many small companies would have a much harder time raising money). I think this is a Good Thing.

As for poor-vs-rich, just watch a beggar in the street. They'll beg from the scruffy person in rags, not waste their time on the neat and besuited. Likewise, when hitchhiking, I know my best bet is the clapped-out old ford escort, while the shiny new BMW would never stop for me.