The purpose of tax is in two parts: one is to raise funds for public services and investment, the second is to avoid the hoarding of wealth by redistributing it through taxation. However, changes in tax law in favour of an ever wealthier capitalist class have turned the tax system on its head so it delivers quite the opposite. Is it time for us to knock this unfair, dysfunctional system on the head and stage a tax revolt?

The Great Tax Break

Myths about corporations include:

a) they are wealth creators,

b) they pay a great share in the total tax revenues of the country and

c) reducing their tax bill means they will pay more. Now to reality…

It was revealed today that only one in four of the UK’s top companies pay their taxes, meanwhile they were receiving tax credits to the tune of hundreds of millions of pounds by people who did pay their taxes.

Company taxes now constitute only 12.5% (Corporation Tax is just 7%) of the tax revenues of the UK. In comparison, the people’s taxes, (income tax and VAT) make up more than 60% of the tax income.

Corporation Tax is lower today than at any time in its history. UK Corporation Tax in 1984 was 52%. By 1986 it was 36%. In 1999 it dropped to 30% and in the most recent budget it was cut to 21%.

Corporations have never had it so good.

The result of these tax changes is that tax receipts are lower today than in 1963. Worse, the composition of those taxes have changed as tax cuts to the wealthiest have seen tax rises to non means tested taxes that hit everyone.

Between 1979 (the launch of Thatcherite Neoliberalism)and 2012 the top rate of income tax was cut from 98% for unearned income and 83% on earnings, to a flat 45%. At the same time, VAT which applies to almost everything your regular person might buy rose from 8% to 20%. National Insurance has shot up from 6.5% to 12%.

This has meant that whilst income taxes have dropped as a proportion of income for most since 1979, income tax as a proportion of income has dropped significantly more for those earning higher incomes, and the total tax bill for a waged earner overall has increased to attempt to cover the shortfall of a great tax break for the wealthiest.

In short, we are the wealth creators (of any wealth that is shared, not hoarded), we pay the lion’s share of the taxes in the country and our taxes have gone up to compensate for their taxes going down.

Corporate Welfare

It’s egregious enough to find that far from us all being in it together, the wage earning tax payer is paying a far higher proportion of the public services bill than the corporation or those who earn their income outside of wages. However, not only are they not paying their fair share into the public pot, they are actively taking cash out of it it for themselves.

Obviously the most high profile case of this was the Bank Bailout. To date, the UK taxpayer, without being consulted, has been made to pay almost 2 trillion pounds, that is two thousand billion pounds, to the richest people on earth. To put this in context: the total UK government spend per annum, is £694.9bn. So four years of total government spending has been spent in on ‘saving’ the banks. This is twenty years of NHS spending (£106.7bn a year), forty years of education spending (£48.2bn), or five hundred years of job seekers allowance (£4.9bn a year). This is the sheer, horrifying scale of the so called Bankers Bailout.

However, a raft of other corporations are, quite legally thanks to a tax system ever more designed to enrich the richest with the fund of the poorest, are on the take.

In a stunning (albeit rare) piece of investigative journalism, the Mail on Sunday broke one the story of corporate welfare in a way not achieved by any one in recent years.

Experian, a credit scoring firm made a £454m profit in the UK least year. They not only paid no tax, but received £159m is tax credits. The paid minus £159m in tax.

Royal Sun Alliance, the insurer, made £613m in profits, paid no tax but received £8m in tax credits from the public purse.

G4S, the private security firm which made a £279m profit last year by running prisons, the probation service and some police stations: paid no tax, but received £8m in tax credits.

Vodafone, the telecommunications firm made a whopping £9.5bn profit, paid no tax but received £4m from the tax payer in credits.

The list goes on. This is flagrant corporate welfare. In fact, the so called ‘Research & Development Tax Credit’ has risen from £70m in the year 2000, to more than £1.1bn now. That is twice what we spend on Standards and Qualifications in the national education system.

Now before some bright spark starts hailing the R&D budget and reminding me why it is so important, you might want to read a tax avoidance piece in Telegraph by KPMG. This article in a mainstream British newspaper specifically cited the R&D tax credits as a tax avoidance scheme.

No one is arguing it doesn’t make sense to invest in our future. But it should be all of our future we’re investing in, we should have a democratic say in what our money is invested in and investment should not be compelled from the poor while being optional for the rich.

Thanks to the Pay As You Earn system, and VAT being applied to products in stores whether we like it or not, the average person has no means of escaping this bogus tax and spend injustice. Or do we?

The Curious Case of the Crowd

The advent of crowd funding and crowd sourcing could be the dawn of the next great idea, in terms of how we develop and fund the things that matter to us.

Crowd funding is an online donation system, where if someone has an idea, a need, a project, or anything which requires investment, they share it on a website and people can donate money to their idea. If the total amount required is not raised, then all investors get their donation back.

This is a win-win for both the producer and the investor. The producer, be they musician, scientist, campaigner or business is no longer beholden to a small pool of large donors and therefore no longer necessarily influenced. Also, anyone can now be an investor. The playing field for investment is democratised and levelled.

Crowd Sourcing (also known as open sourcing) sourcing is where rather than working on a new idea in isolation in order to patent the discoveries oneself to make a profit – people choose to open up development, via the internet, to get the most people to solve the problem in the shortest time.

Recent successes have been made in this area by scientists and artists who have found the old capitalist approach of patent/copyright a barrier rather than a stimulant of progress in their field.

This means that people have, of their own volition, moved from a competitive model of research and development incentivised by profit, to a collaborative approach based on best results. This is something which should thrill the bejesus out of us, and I believe presents a reason to be cheerful.

Asking the Crowd Works

One story which may well blow your mind comes from a lab team at Harvard University. They decided that, rather than follow the normal development model for cancer drugs, they would open source it. This meant, rather than the normal pattern of super high secrecy to develop a drug in house, or attach its development to a large drug company – Jay Bradner and his team simply opened up their labs and their research to any individual lab or research team that wanted to participate. They then created their own spin out companies to roll out the drug into clinical trials and the project has been a massive success.

Now, if we can develop potential cancer cures by crowd sourcing, what else is available? Interestingly enough, the spin out company here Tensha, went through normal Series A funding (venture capital) but it could just as easily have been crowd funded. Imagine then that not only could we cut big money out of the development process, but we could cut them out of the business end aswell.

Perhaps the most lucid argument I have heard in favour of Crowd Funding was put forward by artist and musician Amanda Palmer. Amanda raised $1.2m for a musical project. She chose to crowd fund her musical career because she had got so much from the period of time when her musical career was funded by people throwing coins into her bucket while she busked.

To Amanda, the musician should be unafraid to ask what they are worth, rather than telling people what they are worth and enforcing that worth through copyright laws. She despairs that Hollywood copyright lobbies, the newspapers and other businesses are tying themselves in knots with the question: ‘How do we make people pay for our product?’

Amanda believes that producers should instead ask ‘How do we let people pay for our product?’ and a critical component of that is asking what the product is worth.

What the Hell Has This Got to Do With Tax?

On the surface, perhaps nothing. However, I believe a basic principle is at play here – do we ask people to contribute or do we make them? Currently, the richest are neither being asked, nor being told. Everyone else is compelled by law to surrender ever increasing amounts to a government that fails to reinvest that money in their communities, but supports the ever increasing wealth gap by siphoning it off to private interests in a totally undemocratic fashion.

Now, imagine we could develop crowd sourcing and crowd funding alongside the current system to such a degree that the majority of us who do not support the current tax system could circumvent it? What if we achieved better results in science, education, music, campaigning and other things with this method than the state capitalist model? If we had this alternative, could we not simply turn off the tap and stop paying our taxes?

In recent months crowd funding has seen some huge successes. This year, $6bn will be raised through crowd funding, double last year’s total. Still small, but growing. Not only has a huge amount been raised but across a vast breadth of types of endeavour, and across the globe.

Notable projects include, the Do Good Bus where $100k was raised to a cause to increase volunteering by running monthly bus trips which take wannabe volunteers to different projects. They’ve made volunteering and community building sexy again, by wrapping the whole thing in a sense of adventure. You get on the bus, you don’t know where you will end up, who you will help, or how. The result is awareness raising, an ever growing network of engaged, enthused volunteers and a community getting to know itself.

The Rushmore Group run some of the most well known and well loved independent bars in London, including Milk and Honey,and Danger of Death. They recently broke the record for UK crowd funding when they raised £1m from 143 investors to open a new bar.

Individuals also attain funding or input for more personal reasons. When open source engineer and artist Salvatore Iaconesi was told he had an untreatable form of brain cancer, his response was to hack into his medical records and release them online inviting all comers to crowd source potential cures.

When Donnie Collins was told he could not receive funding by state or insurance company for the medical treatment necessary to complete his female to male gender transition in the US, his college fraternity set up a crowd funding page on IndieGoGo to raise the $8,000 required. Not only did they raise the $8k, but the total has exceeded $18k and the extra funds are being donated to the Jim Collins Foundation which provides financial support to people seeking gender reassignment surgeries.

What these latest innovations have shown is that where our current democracy of state and market fail, digital democracy can win by introducing infinitely more people with ideas to infinitely more people with the ability to fund them.

The Road to Tax Revolt

In crowd sourcing and funding combined, we democratise the act of giving, we level the investor playing field, and we create a worldwide platform for new ideas to be shared, funded and developed into reality. If we were to continue to grow this approach, delivering ever greater personal, community and global successes, we could succeed in doing the unthinkable: creating an alternative model that works.

With a new model tempting us all into it, not through rhetoric but through success in meeting our needs, we could simply say enough is enough and cease to pay these abysmal taxes to these undeserving corporate and political giants.

More than that, we will have proved what many of us (but not enough) already know: that we are actually smart enough, kind enough and team spirited enough to run this show without them.

Discuss!

Feel free to comment here about how this might work, how it might not, how we would increase access to internet to ensure digitial democracy was possible and so on..

Check it Out!

Go look at some crowd funding websites and see it in action. Here are a couple:

ImpactCrowd

Sponsume

Crowdfunder

Do it!

Got an idea, or a need that is being left unsolved by this system? Go set it up as a crowd sourcing/funding idea and test it out.