In the future, medical advances and biotechnology might prevent death. But not the need for taxes.
This week I read a small but interesting tax article by Andrew Sentence (senior economic advisor at Price Waterhouse Coopers), in a column in the morning edition of the City Newspaper (London). In the article, Sentence highlighted that UK taxes on income and national insurance make up nearly half of tax revenues. Also that the combined burden of (labour-related) national insurance on employers and employees at 13.8% and 12% respectively, was higher than the 20% income tax rate on corporate profits.
Meanwhile the combination of UK Council taxes, business rates, stamp duty, inheritance tax and capital gains tax, levied on property values or wealth, raises only about 12% of total tax revenues.
The basic message of the article, was that the UK government needed to reform the tax system. And that it was time for George Osborne (UK Chancellor of the Exchequer) to make his mark as a tax reformer.
I couldn’t agree more. There’s little doubt that the UK Government desperately needs the quantum of all those taxes, to balance the annual Budget (income less infrastructure and other spending) and pay down some of the £1.5 Trillion of legacy debt. The mix of taxes and the relative emphasis is the problem. The mix problem will only grow bigger, as companies invest further in automation and eliminate human jobs too.
To elaborate, as we further enter the age of Big Data, robotics, artificial intelligence and global trade, tax types and tax rates will have to change radically, else the social cohesiveness that we struggle to maintain at present, will be swept aside on a tide of conflict and protest.
The owners of ‘automated capital’ exploit various enterprise incentives and legal trading structures to minimise their corporate profits liable for corporate tax. They also continue to make economically-rational decisions to ‘offshore’ labour costs. Or replace labour with 24/7 automation, laying off human jobs in the process. The only way soften the social impacts of these changes is to more effectively tax the property purchases that such profits are invested in. And perhaps reform VAT to a much higher rate on luxury products than the standard 20% rate at present.
Say I’m right on this (current blue, pink and white collar jobs disappearing at a faster rate than future high-tech job are being created and in different regions of the World too). Where is the lobby group at present in the Western World to lobby effectively for the necessary tax reforms before it’s too late?
The emerging generation of school leavers has the most to lose from the forthcoming automation changes, with their entire working life ahead of them. They need to use their electoral votes wisely. And form a tax reform political party if necessary. The alternative is society facing soaring insurance costs, greater legal costs, a rising crime wave and serious inter-generational resentment.