Can the notion of “fairness” be applied to matters of income tax? The concept of being “fair” was mentioned at least 13 times during the Chancellor’s Spring Budget speech this week. It was perhaps to be expected given previous tax policy documents which implored everyone to pay their “fair share” of tax. The Chancellor used the phrase “those with the broadest shoulders should bear the greatest burden” and whilst some high earners (such as J.K Rowling) believe it their “duty” to pay more tax, others feel to be taxed higher because they work harder/longer than others is to be “penalised” for making extra effort. Some have said that logic comes unstuck when applied to the retail cost of buying items. Whether you earn more or less than the person next to you in the checkout queue, the cost of the item you both intend to purchase is the same. Is that fair?
Some argue in a “just” world that firefighters, police, nurses, etc should be paid as much as sports stars. However, they aren’t. This is likely because life – as parents repeatedly tell children – is not fair. The laws of nature (as Charles Darwin stated) do not rely on fairness. Your friends don’t treat you exactly the same as they treat others. That person whose father owns the company where you work will likely get promoted quicker than you. So why should tax be any different?
Fairness is subjective (if you were asked to pay a “fair amount” of tax, how could there ever be consistency on what that is?) whereas the amount of tax we are required to pay is objective because it is determined by law. The amount of tax paid is not a negotiation. Well, perhaps it is if you are a large, blue chip organisation in the coffee or online search industries, but that is a whole other story…
So what of the Government’s instance on fairness? Typically, experts argue attempts to introduce greater equity into tax is simply an attempt to extract more tax and is an indicator the underlying taxation framework is not “fit for purpose”. Rather than addressing this root cause, it is obviously easier to reframe the issue as a matter of social justice – indeed the UK Government needs all the cash it can get to prop up public spending. The wise words of Winston Churchill (in 1904) still seem not to be heeded when it comes to raising taxes:
“Can people tax themselves into prosperity? Can a man stand in a bucket and lift himself up by the handle?”