Systemic
Fiscal Reform
Liberal Themes of Systemic Fiscal Reform
Systemic Fiscal Reform's radical programme
of taxation, welfare and subsidy changes draws from a number of
themes and political traditions.
The focus on free trade has always been high on
the list of priorities for social liberals, and Systemic Fiscal
Reform aims to extend the free trade concept to the national level.
While free trade has proven its worth at the international level, it
is often criticised when there is a major power imbalance between the
trading partners. That's why the measures in Systemic Fiscal Reform
must be balanced by measures to ensure both fairness and real freedom
in society.
Land reform through the tax system has been a key
recurring theme of Liberal thought since the times of Lloyd George
and Winston Churchill at the start of the 20th Century.
Basing their ideas on the of the 19th Century American,
Henry George, their reform programme was cut short by the First World
War, and the momentum of the time was lost. Since the latter half of
the 20th Century, the focus of governments switched to
trying to make income taxes work against a background of rising
demands on the state. As the system grew to include Capital Gains
Tax, Value Added Tax and Tax Credits, the Liberal's ambitious ideas
of land reform faded. In their place, the Left and Right became
embroiled in political squabbling over an expanding array of
exemptions and adjustments in a constant game of favouritism and
fixes. It should be now be clear to any outside observer that land's
tax exemption and array of government subsidies helps nobody but the
landed few. Meanwhile, the Transaction Taxes loved by the Left and
Right are crumbling under their own weight.
The idea a Carbon Tax is drawn from the works of
Pigou and Ramsay (1927).
Perhaps the newest idea is that of Universal
Welfare or Citizen's Income. Advocated by Phillippe van Parijs, the
Belgian political economist, now a Harvard Professor, the idea dates
back to 1968. Adopted at one time by the Liberal Democrats, the
Citizen's Income also has strong support from the Green movement.
Universal Welfare is founded on the same philosophical principle that
brought the National Health Service and the Welfare State, based on
groundbreaking Liberal policies from a century ago.
Systemic Fiscal Reform and the Liberal Democrats
The Liberal Democrats seem to have lost their
roots in the liberal tradition. The party has almost completely
forgotten the Land Issue, while apparently accepting without question
the use of Transaction Taxes as the primary source of government
revenue. A once radical and distinctive liberal agenda has given way
to playing the game of minor adjustments like “a penny on Income
Tax for education”, or adding a local component to Income Tax in a
constant battle to win votes. Even the current flagship policy to
abolish the Council Tax seems to conflict with the historic priority
of land taxation. Leadership on the key issue of tax is essential to
win a General Election.
Whilst the party has flirted with the Citizen's
Income in the past, it is no longer policy. Apparently this is
because it is deemed unaffordable when funded through the current tax
system. This says more about the inefficiency and problems with the
current tax system than the merits of a Citizen's Income. The policy
itself was very popular with campaigners, even attracting new members
to the party, and meeting with genuine enthusiasm when explained to
voters. The public can see a new approach to welfare is long
overdue.
The Party is right therefore, to reject a
Citizen's Income without radical tax reform. Simply adjusting Income
Tax on workers and raising their top rate makes an expensive and
damaging system even worse. Combining the Land Value Tax and
Citizen's Income ideas however is both practicable and
philosophically sound. The combination allows full integration of
the tax and welfare system with the minimal of burden and intrusion.
The Land Value Tax collects the scarcity “rent” created from the
value of local amenities and effective government. Normally this
“rent” is collected by the landowner or householder as a tax
exempt windfall income and reflected in soaring house prices. Is it
not right that the overall success of a community is shared by all?
The introduction of a Carbon Tax is the only
way to ensure a predictable, rising carbon price. The failure of the
EU Emissions Trading Scheme to set predictable future prices cannot
be fixed, and the business uncertainty is proving very costly
even at this early stage. Would a new coal power station at
Kingsnorth be built at €100/tonne(CO2) price? Almost
certainly not! The EU ETS forces the operator to take a billion
pound gamble on behalf of the British people and the global
environment. Not only does a hefty Carbon Tax overcome this game of
Energy Roulette, it can eliminate a whole battery of inefficient and
despised taxes, including Europe's baroque system of Value Added Tax.
Liberal Democrats and the ELDR should join with The Greens at the
forefront of this campaign. Previous attempts at an EU Carbon Tax
met with almost unanimous support by the members, with John Major's
Government opposition being the insurmountable barrier that led to
the compromise that is the ETS. Now that the failures of the ETS can
be seen, re-examining the Carbon Tax is urgent.
Taxation and welfare policies are top in voters'
minds at general elections. The Liberal Democrats have broken their
liberal tradition and now offer an indistinct “me too” programme
that will rightly be ignored by voters and the media alike. The
Leadership must urgently convene to begin the move to a
radical new policy framework.
Liberal Democrats must say:
Yes to
the universal Citizen's Income!
Yes to
replace Income Tax with a Land Value Tax!
Yes to
replace VAT with a uniform Carbon Tax!
Yes to
abolish the HMRC!
No to
ballooning tax bureaucracy!
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