Post-war reconstruction involved taxing the richest – it could help with building a low-carbon economy.

Amid the worst public health crisis in a generation, an economic disaster has been brewing. Experts predict the fallout from Covid-19 could cause a historic downturn. Meanwhile, scientific evidence of species extinction, biodiversity loss and climate change continues to accumulate. To create long lasting prosperity, the post-pandemic recovery will also need to tackle the complex environmental crisis.

“A recent example from France shows exactly how not to do it.”

It will take government investment to accelerate a green transformation of the economy, so that energy, heating and transport systems can reach net-zero emissions as soon as possible. So, alongside borrowing at a time of low interest rates, how could some of that money be raised?

A recent example from France shows exactly how not to do it. A fuel tax hike by Emmanuel Macron’s government – intended to nudge people to use less petrol, diesel and heating oil – sparked widespread protests throughout 2018 and 2019. The gilets jaunes (yellow vests) movement tapped into discontent about the rising cost of living, but also a deep resentment that the public was having to shoulder the cost of decarbonisation.

If ordinary people, who have been hit hard by the pandemic – and have relatively small carbon footprints – are expected to cough up to fund a green economic stimulus, the programme is unlikely to be popular. But 75 years on from the UK’s last great recovery effort, it’s worth remembering how Britain pulled together in the past.

Why should the richest contribute more?

The UK’s millionaires and billionaires hold more responsibility for climate change as a result of their lifestyles and investments. One study estimated that the average greenhouse gas emissions per person of the richest 1% in the UK is equivalent to around 147 tonnes of carbon dioxide, compared to an average of four tonnes for someone in the poorest 10%. One of the reasons that the rich have larger carbon footprints is because they fly further and more often than the average person.

The richest 1% also invest their wealth in companies whose operations are highly polluting. I created a database where I calculated the greenhouse gas emissions connected to the shares held by senior executives and directors at major oil, gas and mining companies. Since I pioneered this methodology, Bloomberg Green’s work has helped identify the world’s ten richest billionaires whose fortunes help fuel climate change. Warren Buffet – the world’s fifth richest man – owns Berkshire Hathaway, a conglomerate that has held shares in several airlines and energy utilities. According to Bloomberg Green’s analysis, in 2018 Buffett’s conglomerate “was directly and indirectly responsible for 189 million tons of greenhouse gas emissions” which they calculate is the same as burning 21 billion gallons of gasoline..

“The UK’s millionaires and billionaires hold more responsibility for climate change as a result of their lifestyles and investments.”

The UK has a history of making the richest contribute more at a time of national crisis. One of the things the UK government did to fund the war effort and post-war reconstruction after 1945, was to raise taxes on income, inheritance and luxury goods, like motor cars. In many ways, carbon inequality was even more pronounced in the early part of the 20th century, as only the richest could afford cars.

The top marginal income tax rate went up from 75% in 1938 to 98% in 1941, and it stayed at this level until 1952, only dropping below 89% in 1978. The top inheritance tax rate went up from 50% in 1938 to 65% during the war, and it increased to 80% between 1949 and 1968. This source of additional revenue helped Britain build a welfare state and the NHS.

In 2020, income tax on those earning over £150,000 is 45%, while inheritance tax is set at 40%. Since millions of working people have been pushed into unemployment and debt by the pandemic, they should be the first to get help, not the first to be taxed.

A bailout for workers

The global collapse in demand for oil has cost thousands of people their jobs in the North Sea oil and gas sector. Around 270,000 people depend on this industry – that’s a lot of people facing an uncertain future. But their skills could be redeployed for better purposes.

Starting in the 1970s, the UK government enabled the extraction of oil and gas in the North Sea through massive incentives and investment, and it continues to incentivise extraction through tax breaks. The government should stop propping up this dying industry and pivot to support the growing offshore wind energy sector to replace oil and gas jobs lost that are not coming back.

The transferable skills that most workers in the North Sea oil and gas supply chains already have can be used to make the UK a global powerhouse for offshore wind energy. For those with specialist skills, retraining could be provided.

Raising taxes on the richest who have most responsibility for climate change is one way to raise revenue to secure the livelihoods of oil and gas workers, and their grandchildren, by addressing climate change. Just as those with the broadest shoulders were asked to make their contribution to the war effort, so should the wealthiest help communities get back on their feet today.

“Since millions of working people have been pushed into unemployment and debt by the pandemic, they should be the first to get help.”

Prime minister, Boris Johnson, has said the pandemic is a national crisis on a par with the Second World War. In 2020, people are celebrated the anniversary of Victory in Europe day during another hour of need. Just as it did 75 years ago, the government should ask those with more resources – and the largest carbon footprints – to contribute more to the country’s green reconstruction.

 

This article was first published in The Conversation on 8 May 2020 and is reproduced with the permission of the author.

Dario Kenner

Dario is a Visiting Fellow at the Global Sustainability Institute based at Anglia Ruskin University, Cambridge. His research focuses on the connections between wealth and environmental impact. He is the …

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One Comment on “The only way out”

  1. This article has the ethical principle of Robin Hood. He stole from the rich and gave the proceeds to the poor. Even today, this is still regarded as a criminal offense when an individual does it, and Robin Hood was hung for it in spite of his good intentions (of which the road to hell is paved). Taxation of wealth earned or cheated over should also be regarded as socially unjust because it is based on a person’s income and not on what such a person may take from and should owe to society.

    The most ethical kind of tax is one that ensures that everybody has equal opportunities to earn and reside sensibly, not simply (and socialistically) to be based on the sharing of personal gain and its value. The opportunities that nature offers are mostly in the potential bounty and productive capacity of the land. Its ownership and the right to occupy and use a part of it is stopping somebody else from doing the same, and consequently this opportunity should be shared by taxing land values. Then those who do own land will have to share its potential benefits with those who do not. The Taxation of Land Values (LVT) has the following effects on our social system of macroeconomics:

    17 Aspects of LVT Affecting Government, Land Owners, Communities and Ethics

    Four Aspects for Better Government:
    1. LVT, adds to the national income as do other taxation systems, but it should replace them.
    2. The cost of collecting the LVT is less than for all other production-related taxes, since tax avoidance becomes impossible–the various sites are visible to all, and their ownership is public knowledge.
    3. Consumers pay less for their purchases due to lower production costs (see below). This creates greater satisfaction with the management of national affairs.
    4. The speculation in and withholding of unused land is eliminated, see item 7 and the national economy stabilizes. It no longer experiences the 18 year business boom/bust cycle, due to periodic speculation in land values (see below).

    Six Aspects Affecting Land Owners:
    5. LVT is progressive–owners of the most potentially productive sites pay the most tax. Urban sites provide the most usefulness and resulting tax. Big rural sites have less value and can be farmed appropriately to their ability to provide useful produce.
    6. The land owner pays his LVT regardless of how his site is used. A large proportion of the present ground-rent from tenants becomes the LVT, with the result that land has less sales-value but a significant “rental”-value (even when it is not used).
    7. LVT stops speculation in land prices because the withholding of land from proper use is not worthwhile.
    8. The introduction of LVT initially reduces the sales price of sites, even though their rental value can still grow over a longer term. As more sites become available, the competition for them is less fierce.
    9. With LVT, land owners are unable to pass the tax on to their tenants as rent hikes, due to the reduced competition for access to the additional sites that come into use.
    10. With LVT, land prices will initially drop. Speculators in land values will want to foreclose on their mortgages and withdraw their money for reinvestment. Therefore LVT should be introduced gradually, to allow these speculators sufficient time to transfer their money to company-shares etc., and simultaneously to meet the increased demand for produce (see below, items 12 and 13).

    Three Aspects Regarding Improved Communities:
    11. With LVT, there is an incentive to use land for production or residence, rather than it being unused.
    12. With LVT, greater working opportunities exist due to cheaper land and a greater number of available sites. Consumer goods become cheaper too, because entrepreneurs have less difficulty in starting-up their businesses and because they pay less ground-rent–demand grows, unemployment decreases.
    13. Investment money is withdrawn from land and placed in durable capital goods. This means more advances in technology and cheaper goods too.

    Four Aspects About Kinder Ethics:
    14. The collection of taxes from productive effort and commerce is socially unjust. LVT replaces this national extortion by gathering the surplus rental income, which comes without any exertion from the land owner or by the banks– LVT is a natural system of national income-gathering.
    15. The previous bribery and corruption for gaining privileged information about land cease. Before, this was due to the leaking of news of municipal plans for housing and industrial development, causing shock-waves in local land prices (and municipal workers’ and lawyers’ bank balances).
    16. The improved use of the more central land of cities reduces the environmental damage due to a) unused sites being dumping-grounds, and b) the smaller amount of fossil-fuel use, when traveling between home and workplace.
    17. Because the LVT eliminates the advantage that landlords currently hold over our society, LVT provides a greater equality of opportunity to earn a living. Entrepreneurs can operate in a natural way– to provide more jobs because their production costs are reduced. Then untaxed earnings will correspond to the value that the labor puts into the product or service. Consequently, after LVT has been properly and fully introduced as a single tax, it will eliminate poverty and improve business ethics.

    TAX LAND NOT PEOPLE; TAX TAKINGS NOT MAKINGS!

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