Above the entrance to the US Internal Revenue Service are inscribed the immortal words of Justice Oliver Wendell Holmes: “Taxes are the price we pay for a civilized society.” One week into the new tax year, Simon Leadbetter questions the foundations of our tax system.
Many people take great issue with paying tax. The Taxpayer’s Alliance actively and vocally campaigns for lower tax rates. As they put it: “Taxes have been rising but there has been very little improvement in the quality of schools, hospitals and transport provided by government. National debt has now surpassed £1 trillion and unless action is taken to tackle unsustainable public spending future generations will inherit the consequences of today’s extravagance.” While some B> readers might take issue with the assertions contained within that bold statement, we are concerned with any unsustainable behaviour where “future generations will inherit the consequences of today’s extravagance.” And if the tax system is unsustainable, it requires our attention.
Those who take exception to tax generally see it as an attack on individual freedom and choice; a constraint and drag on free enterprise and economic growth; and, for some, immoral extortion by the majority from the minority. According to HMRC, the highest-earning 1% of Britons pay almost 30% of all income taxes. The highest earning 50% pay nearly 90% of all tax. Taxing the population to pay for an inefficient state is wrong if that inefficiency is a well-evidenced fact rather than a perception born of political ideology (i.e., a pathological dislike of the State). It is equally wrong to tax the population, as is currently happening, for the many failures of private—ordinarily wealthy—organisations, such as banks; it costs taxpayers up to £5bn a year just to service the loan that the banking crisis incurred as a result of the greed and incompetence of bankers—or the equivalent of England’s entire further education budget.
The much-loved income tax was introduced as a temporary measure in 1799 and again in 1803 to provide money to fend of the threat of Napoleonic France. It became a permanent fixture, albeit temporary in law, from 1874. It is reapplied as a temporary measure by Parliament every April under the Finance Act and now contributes the largest portion of revenue for HM Treasury representing 26% of all tax receipts.
Overall, the Government currently takes 38% of GDP as tax. In fact, since 1994, tax has been reliably in the 36–38% range and far below the worst taxation excesses of the early Thatcher years.
But why is tax relevant to a magazine on sustainability?
We believe in sustainable and responsible free markets operating under a rule of law in stable liberal democracies. The creative and innovative energy unleashed by free markets in the developed world has proved a great boon to our society and the welfare of the population as a whole. The problems we now face from climate change to resource scarcity to increased urbanisation will require ever-greater creativity and innovation from our most exceptional entrepreneurs, engineers and scientists. If taxes limit or discourage a nation’s capability to use creativity and innovation to address future crises then they should be debated and addressed.
Being pro-markets, we look to Adam Smith, the father of economics, for inspiration. When examining the different forms of taxation, Smith devoted a full third of his treatise—An Inquiry into the Nature and Causes of the Wealth of Nations—to the subject of government revenue and the methods by which it is best collected, including new taxes. His argument adheres to four maxims that all good taxes should conform to. Two refer to the ‘certainty’ and ‘convenience’ of taxation. Fiddling with the Feed in Tariff (FiT) and Carbon Reduction Commitment (CRC) are two examples of a Government tinkering with the certainty principle. But the two most noteworthy ones we repeat here are:
“Every tax ought to be so contrived as both to take out and to keep out of the pockets of the people as little as possible, over and above what it brings into the public treasury of the State.
“The subject of every State ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the State.”
This is remarkably close to Karl Marx’s slogan, “From each according to his ability, to each according to his need”. This is often ignored by free market think tanks, including the Adam Smith Institute, who focus on his economic arguments. For the record, Adam Smith also opposed joint stock companies so favoured by free market thinkers as he felt a separation of management and ownership would lead to inefficiency: “being the managers… of other people’s money than of their own, it cannot well be expected, that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own… Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company.” From personal experience, working in some of the UK’s largest organisations, I can testify to this negligence and inefficiency almost universally being the case.
The two taxes that Adam Smith favoured were a tax on luxuries (non-essentials) and a tax on ground rents (the annual value of holding a piece of land). He opposed excise, customs and taxes on profits, and reserved his greatest opprobrium for taxes on labour. He saw all of these ‘income taxes’ as distorting the smooth operating of the market, as a disincentive to production, and as unfairly raising the prices of manufactured goods beyond a level that would naturally occur from the value of land and consumable commodities.
The advantage of taxes on luxuries (e.g., VAT, which contributes 17% of Exchequer receipts) is that they are very hard to avoid and relatively simple to collect. Taxes on non-essentials have the additional benefit of acquiring an income for the State from those products that have a cost to the State, such as driving (providing roads and dealing with accidents), alcohol (health risks) and tobacco (health risks).
The value of land, or ‘the environment’, is relatively straightforward to determine even under the triple pillars of economic, social and environmental value. A tax on such value is simple to collect and harder to evade. Land as a physical asset cannot be easily hidden or registered offshore unlike other forms of intangible wealth. Major corporations could not reduce their tax bill by registering shell companies in tax havens to hide income-derived profits. Land that is used unsustainably would, through the mechanism of the market, be shifted to use that is more economically, socially or environmentally beneficial—ideally all three. If someone cannot keep land sustainably or is using land unsustainably, they would give up that land and only use what they could sustain.
The sting in the tail is that land value tax is currently a fringe interest (although both Labour and the LibDems have campaign groups in favour of it). Additionally, introducing such a tax would take a generation, so as to avoid destroying confidence in the property market, to phase out income tax and to assess land values on a sustainable basis. The most recent example of a relatively straightforward but flawed version, the Poll Tax, cost a Prime Minister her job and set the land value tax argument back to square one, circa 1879. While attractive in theory it is troublesome in practice.
So where do we go from here?
The purpose of income tax was to fend off the clear and present danger of a French invasion and naval mutiny. It is fair to say that the Napoleonic threat and the dangers of mutinous seaman have receded somewhat of late. The clear and present danger to our economy and society is climate change and resource scarcity.
One elegant solution would be taxing pollution, inefficiency and waste as we go through a transition from taxing income to taxing wealth. A tax on carbon simply is not enough as it overlook other forms of pollution. One of the deepest flaws of corporate tax is that it ignores the externalities or real cost of a business’ operation (i.e., pollution, inefficiencies and waste) so that both management and shareholder alike avoid the full cost of the business model. Those external costs are passed onto the taxpayer who must fund, for example, health costs from pollution, the impact of raw material overuse, a management of a degraded environment and ecosystem, and the many issues associated with waste disposal. Taxing these outputs more heavily would create an essential flight of capital from the heaviest polluters and the inefficient, or those least willing to mend their ways, and a change in consumption patterns to favour services and industries with lower pollution, higher efficiency, and less waste.
In an ideal world, we would abandon taxes on income and profit from sustainable activities to stimulate an entrepreneurial renaissance in these areas; but, it would require the courage to move the burden of tax to sustainable land values and non-essential items with a ‘temporary’ or semi-permanent ‘pollution, inefficiency and waste levy’ to fund adaptation, mitigation and geo-engineering in the coming crisis. Sustainable enterprise is thus liberated, unearned wealth is penalised, and those who fail to act cover any shortfall.
Jean Baptiste Colbert (Minister of Finances under King Louis XIV of France) once said, “The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.” The art for coming generations will simply be to keep the goose alive. We appear to lack the serious and credible leadership in the current breed of professional politicians who have the courage, reason, rhetorical skills, determination and persuasiveness to carry out any of the reform we so desperately need to create a sustainable economy and tax system.
5 Easy Things You Can Do to Make Your Home More Sustainable
Increasing your home’s energy efficiency is one of the smartest moves you can make as a homeowner. It will lower your bills, increase the resale value of your property, and help minimize our planet’s fast-approaching climate crisis. While major home retrofits can seem daunting, there are plenty of quick and cost-effective ways to start reducing your carbon footprint today. Here are five easy projects to make your home more sustainable.
1. Weather stripping
If you’re looking to make your home more energy efficient, an energy audit is a highly recommended first step. This will reveal where your home is lacking in regards to sustainability suggests the best plan of attack.
Some form of weather stripping is nearly always advised because it is so easy and inexpensive yet can yield such transformative results. The audit will provide information about air leaks which you can couple with your own knowledge of your home’s ventilation needs to develop a strategic plan.
Make sure you choose the appropriate type of weather stripping for each location in your home. Areas that receive a lot of wear and tear, like popular doorways, are best served by slightly more expensive vinyl or metal options. Immobile cracks or infrequently opened windows can be treated with inexpensive foams or caulking. Depending on the age and quality of your home, the resulting energy savings can be as much as 20 percent.
2. Programmable thermostats
Programmable thermostats have tremendous potential to save money and minimize unnecessary energy usage. About 45 percent of a home’s energy is earmarked for heating and cooling needs with a large fraction of that wasted on unoccupied spaces. Programmable thermostats can automatically lower the heat overnight or shut off the air conditioning when you go to work.
Every degree Fahrenheit you lower the thermostat equates to 1 percent less energy use, which amounts to considerable savings over the course of a year. When used correctly, programmable thermostats reduce heating and cooling bills by 10 to 30 percent. Of course, the same result can be achieved by manually adjusting your thermostats to coincide with your activities, just make sure you remember to do it!
3. Low-flow water hardware
With the current focus on carbon emissions and climate change, we typically equate environmental stability to lower energy use, but fresh water shortage is an equal threat. Installing low-flow hardware for toilets and showers, particularly in drought prone areas, is an inexpensive and easy way to cut water consumption by 50 percent and save as much as $145 per year.
Older toilets use up to 6 gallons of water per flush, the equivalent of an astounding 20.1 gallons per person each day. This makes them the biggest consumer of indoor water. New low-flow toilets are standardized at 1.6 gallons per flush and can save more than 20,000 gallons a year in a 4-member household.
Similarly, low-flow shower heads can decrease water consumption by 40 percent or more while also lowering water heating bills and reducing CO2 emissions. Unlike early versions, new low-flow models are equipped with excellent pressure technology so your shower will be no less satisfying.
4. Energy efficient light bulbs
An average household dedicates about 5 percent of its energy use to lighting, but this value is dropping thanks to new lighting technology. Incandescent bulbs are quickly becoming a thing of the past. These inefficient light sources give off 90 percent of their energy as heat which is not only impractical from a lighting standpoint, but also raises energy bills even further during hot weather.
New LED and compact fluorescent options are far more efficient and longer lasting. Though the upfront costs are higher, the long term environmental and financial benefits are well worth it. Energy efficient light bulbs use as much as 80 percent less energy than traditional incandescent and last 3 to 25 times longer producing savings of about $6 per year per bulb.
5. Installing solar panels
Adding solar panels may not be the easiest, or least expensive, sustainability upgrade for your home, but it will certainly have the greatest impact on both your energy bills and your environmental footprint. Installing solar panels can run about $15,000 – $20,000 upfront, though a number of government incentives are bringing these numbers down. Alternatively, panels can also be leased for a much lower initial investment.
Once operational, a solar system saves about $600 per year over the course of its 25 to 30-year lifespan, and this figure will grow as energy prices rise. Solar installations require little to no maintenance and increase the value of your home.
From an environmental standpoint, the average five-kilowatt residential system can reduce household CO2 emissions by 15,000 pounds every year. Using your solar system to power an electric vehicle is the ultimate sustainable solution serving to reduce total CO2 emissions by as much as 70%!
These days, being environmentally responsible is the hallmark of a good global citizen and it need not require major sacrifices in regards to your lifestyle or your wallet. In fact, increasing your home’s sustainability is apt to make your residence more livable and save you money in the long run. The five projects listed here are just a few of the easy ways to reduce both your environmental footprint and your energy bills. So, give one or more of them a try; with a small budget and a little know-how, there is no reason you can’t start today.
How to Build An Eco-Friendly Home Pool
Swimming pools are undoubtedly one of the most luxurious features that any home can have. But environmentally-conscious homeowners who are interested in having a pool installed may feel that the potential issues surrounding wasted water, chemical use and energy utilized in heating the water makes having a home swimming pool difficult to justify.
But there is good news, because modern technologies are helping to make pools far less environmentally harmful than ever before. If you are interested in having a pool built but you want to make sure that it is as eco-friendly as possible, you can follow the advice below. From natural pools to solar panel heating systems, there are many steps that you can take.
Choose a natural pool to go chemical free
For those homeowners interested in an eco-friendly pool, the first thing to consider is a natural pool. Natural swimming pools utilise reed bed technology or moss-filtration to naturally filter out dirt from the water. These can be combined with eco-pumps to allow you to have a pool that is completely free from chemicals.
Not only are traditional pool chemicals potentially harmful to the skin, they also mean that you can contaminate the area around the pool if chemical-filled water leaks or is splashed around. This can be bad for your garden and the environment general.
It will be necessary to work with an expert pool builder to ensure that you have the expertise to get your natural pool installed properly. But the results with definitely be worth the effort and planning that you have to put in.
Avoid concrete if possible
The vast majority of home pools are built using concrete but this is far from ideal in terms of an eco-friendly pool for a large number of reasons. Concrete pools are typically built and then lined to stop keep out any bacteria. This is theoretically fine, except that concrete is porous and the lining can be liable to erode or break which can allow bacteria to enter the pool.
It is much better to use a non-porous material such as fibreglass or carbon ceramic composite for your pool. Typically, these swimming pools are supplied in a one-piece shell rather than having to be built from scratch, ensuring a bacteria-free environment. These non-porous materials make it impossible for the water to become contaminated through bacteria seeping into the pool by osmosis.
The further problem that can arise from having a concrete pool is that once this bacteria begins to get into the pool it can be more difficult for a natural filtration system to be effective. This can lead to you having to resort to using chemicals to get the pool clean.
Add solar panels
It is surprising how many will go to extreme lengths to ensure that their pool is as eco-friendly as possible in terms of building and maintaining it but then fall down on something extremely obvious. No matter what steps you take with the rest of your pool, it won’t really be worth the hassle if you are going to be conventionally heating your pool up, using serious amounts of energy to do so.
Thankfully there are plenty of steps you can take to ensure that your pool is heated to a pleasant temperature while causing minimal damage to the environment. Firstly, gathering energy using solar panels has become a very popular way to reduce consumption of electricity as well as decreasing utility bills. Many businesses offer solar panels specifically for swimming pools.
Additionally, installing an energy efficient heat pump or boiler to work in conjunction with your solar panels can be hugely beneficial.
Finally, it is worth remembering that there are many benefits to investing in a pool cover. When you cover your pool you increase its heat retention which stops you from having to power a pump or boiler to keep it warm. This works in conjunction with the solar panels and eco-friendly heating system that you have already had installed.
Additionally, you cover helps to keep out dirt and other detritus that can enter the pool, bringing in bacteria. Anything that you can do to keep bacteria out will be helpful in terms of keeping it clean.