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  1. Politics
5 February 2015

We don’t need tax cuts for the rich, we need greater say in where our tax goes

A system of tax sovereignty would be easy to achieve for Britain, and would give our democracy a truly radical boost.

By Lauren Razavi Lauren Razavi

The old mantra that “all taxation is theft” can feel all too true in times of austerity. British citizens earning more than the relevant thresholds hand over 11 per cent of their earnings in National Insurance payments and at least another 20 per cent through income tax. In exchange for these generous contributions, the government is currently implementing more and more cuts to public services – from healthcare to education to social welfare – while also offering tax reductions to the richest in our society.

Political theorists have spoken for years about tax sovereignty: the idea that public finance should adopt more of a consumer choice approach. In other words, citizens should be able to tell the government how to spend the tax they’ve paid, rather than that money disappearing into bank bailouts, unnecessary mass surveillance and committing war crimes in Iraq, for example.

At present, the British public elects MPs to talk to other MPs, civil servants and appointed peers, and between them, they decide how taxpayers’ money should be spent. But what if we had more say over government spending? What if we could decide directly which public sectors and causes are worth spending on and which aren’t? I somehow think that the House of Lords’ champagne budget would have been swept out of the door completely, and someone surely would have put a stop to the £100m wasted on botched IT and construction projects before so much had been spent.

And it turns out that individuals are likely to contribute more in taxes and donations if they can direct their funds towards the sectors or causes they care about. A 2011 study at Texas A&M University, published in the Journal of Public Economics, gave volunteers $20 and the choice of whether to keep it all or donate some to national government. In these circumstances, 80 per cent decided to donate, and gave an average of $1.68 each. Asked whether to keep it all or donate a percentage to specific government-funded schemes, participants were much more willing to contribute: they gave an average of $4.04 to disaster relief and $5.52 to cancer research.

This form of direct democracy would mean increased political participation and a more representative form of national spending. The government would be forced to act on citizen’s wishes in terms of spending, identifying and responding to public priorities–something that our current taxation system is woefully bad at doing. Knowing that the funds would be spent as citizens see fit responsibly – and for the common good – the public would likely be much happier handing over 31 per cent of their earnings to government.

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By utilising new technologies, and thereby decreasing bureaucracy, a system of tax sovereignty would be easy to achieve for Britain. It wouldn’t take £100m in botched government contracts to set up a new section of the HMRC website for people to log onto and direct their taxes towards specific sectors or causes (and, in fact, the most effective way to safeguard the public against such tax revenue waste is through a system giving the public greater powers).

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Self-employed people and companies already input their accounts and pay their taxes online, so the government already has proven and secure systems in place for dealing with taxation digitally. Even those who do not have internet access at home could make sure of our free public library computers or WiFi to allocate their taxes once per year.

It’s this kind of simple but radical policy that could truly change government and democracy in Britain, and turn our national politics into exactly what they ought to be: progressive, representative and transparent.