Why We Need Tax Justice in 2013

The Simpsons, Fox Broadcasting Company

by Richard Murphy

I said I would make no predictions for 2013. A few hours in and the weight of evidence makes me change my mind. In 2013 we will see political prevarication in defence of the status quo come to the fore, and government become gridlocked by indecision as the might of those with financial power is brought to bear on it, and seeks to undermine democracy.

The ‘fiscal cliff’ debacle is the evidence. The scenario is absurd, and so is the rhetoric.

Of course the USA needs to cut its deficit, but any government’s deficits can, as a matter of fact, only be cut when private sector consumption, net investment and net exports grow. Since the Fiscal Cliff gave no reason for any of those to change then nothing anyone in the US proposed would have made its deficit better; indeed, it would have made it worse. That’s as close to an economic fact as it gets.

That was not, however, the argument that was rehearsed. Obama obsessed about the most important people  he said. They were the middle class. He then implied that  they were about 98% of America. Actually, he chose to ignore the 50 million or so below the poverty line.

The Republicans held out for the rich; anyone else could pay but them. In the process, they argued any tax charge on the rich had to be matched with a tax concession for US corporations. The impact is simple: what they are willing to have taken from one hand they want to be given to the other. That’s not a compromise: that’s just deceit.

And yes, I know that this simplifies matters, but not greatly and that’s because the right sees that its power lies with wealth.  The left (in US terms, and certanly in New Labour terms) sees its power lies with the middle class seeking to preserve baby boomer privilege.

And all the while the reality is that inequality grows and these arguments ignore the fact that it is the imbalances that are crippling our economies.

There’s the imbalance between corporations piled high with cash that they’re lending to government and those governments who those corporations seek to deny revenue to.

And there is the imbalance between a financial elite and the rest, best evidenced in the short term by the changes in house prices in and out of London and in the long term by growing inequality throughout the UK and elsewhere.

Add to that the imbalance between generations, mine having it all (relatively speaking) and the one that is following facing almost insurmountable odds to achieve what we did because of the sheer impossibility of securing work paid at a decent rate and buying a house at an affordable price. In combination that’s a recipe for oppression and then dissent.

And yet despite that in 2013 we’ll see politicians spending yet more time pandering to their power bases, whether of wealth or middle class security, whilst ignoring the crisis of the poor and those without hope of the security that is the basis for the comfort of both the baby boomer and those with wealth.

My fear? Simply that this will breed divisions, not between nations, but within nations. And that’s very, very dangerous.

And since much (although of course not all) of this problem can be addressed by greater tax justice, both within the tax system and by enforcing the tax system we have got to address the tax gap,  that’s what I’ll continue to talk about.

2013 is going to be a tough year for many. We have to change the narrative. Only then can we talk hope.

Piece originally posted at Tax Research UK|