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Governments should not subsidise business through the working poor
Posted: 26 August 2011 @ 11:18 UT from Seattle, US

I don't often blog about politics, but in the decline of the UK exchequer and the shift of blame from the corporate greedy to the working needy has seen some fundamentally unfair and downright nasty pieces of legislation being progressed by our minority government.

The latest of these policies designed to help prop up the exchequer (which we all know is carrying enormous debt caused by bailing out the greedy and reckless, and is now being bullied by the same because of its debts) is the idea to cut council tax benefits by 10% and federate the blame away from central government to local.

For those of you who are not familiar with the UK taxation system (and I'm no expert), council tax is a local tax paid by residents according to the value of the homes they live in, and funds local amenities like refuse collection. However, some people in the UK are on sufficiently low incomes that they receive benefits to help them pay their share of this tax.

Let me re-iterate that: some people in the UK are so poor that they government steps in to help them pay their tax.

On the surface, you could assert that the government is currently doing a fine thing by helping those with few means, and that by reducing the council tax help it gives to some of its most needy citizens it would be doing them quite a disservice. That's an easy argument to make, especially since the relatively few recipients of this benefit need all the help they can get.

But the easy answer is not necessarily the right answer. I disagree with this benefit, not because I think it is unworthy, but because I think it places the burden in the wrong place. By subsidising a citizen's tax obligations, the government is effectively subsidising employers and continuing to allow employment for far below a living wage (including the ability to meet the tax obligations that implies).

This is an outrageous situation where the government (on behalf of the citizens) subsidises corporations through beneficial corporate tax regimes, provides them with a stable and regulated market, educates and medicates their employees, and provides a relatively competent transport network to move their goods and services around. But by paying its own tax, the government is also effectively subsidising industry's wage bill.

Governments shouldn't be in the business of paying taxes to themselves. Governments should be in the business of provisioning services through taxes they collect. We must undo the moral and financial decay that has allowed business to free-ride from the tax payer and force them to pay a living wage and end this perversion where we subsidise the rich by using the working poor as a government-sponsored investment vehicle.

It's time for business to pay their fair share.

Comments:
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It will take a revolutionary idea to fix this one.

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Jim I cant agree more about the need for fair pay. 

 

I wonder what you think about the government taxing these rich companies more even when they pay their employees fairly? 

Last year in Australia the government attempted to tax the mining companies the ensuing campaign toppled the then prime minister and has left us with a government incapable of governing due to such as a small minority. http://www.theage.com.au/national/mining-industry-dug-deep-to-shaft-rudd-over-tax-20110201-1acfi.html 

It sounds like Obama in the US is intending to introduce laws in tax the affluent. And this is a sentiment shared by Warren Buffett http://www.nytimes.com/2011/08/15/opinion/stop-coddling-the-super-rich.html. 

Cheers, 

Aran

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Hi Aran, 

In the case of Australian mining, I support the government wholeheartedly. This is about ensuring a sustainable exploitation of a finite resource via fiscal means. The mining companies, however, would much prefer rapid exploitation and exit from Australia shutting down the livelihoods of its staff and decreasing operating costs. 

I'm actually aghast at how easily the Australian electorate were duped by "true blue" types telling the government not to impact their jobs. It was a marvellous and horrifying PR job. 

But more generally here, I'm in favour of the rewards being more widely shared than just to shareholders. There are many stakeholders (even in the mining scene) which should be rewarded from such a boom. So a super tax on Rio and friends? Sure, let's make sure they are in it for the long term, as a stakeholder (not parasite) for the Australian people. And tax is one way of achieving that goal. 

Jim

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Right on Jim! Also, I was at your workshop on REST in Practice at QCON SF. Great Job. Occupy Silicon Valley!

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