A collaborative blog for Current Affairs and Policy Debate

The less than idiotic debate about marriage and taxation

In Uncategorized on January 7, 2010 at 9:25 pm

David Weber

There was a recent piece in the FT by Chris Giles concerning the “idiotic debate about recognising Marriage in the Tax system“. As it turns out if you read the article, all but one of the arguments addressed in the article were indeed idiotic. The problem is, however, that the writer failed to look up any good arguments.

It’s a common trend for debates in the blogosphere, particularly partisan ones, to be very selective, not only with facts, but also with arguments. This is perhaps obvious, and something one should be able with training to account for, but it can be quite severe at times. I never quite worked out, after all the debates between the papers and blogs, quite what all the facts were concerning the Tories and their European bedfellows. I never quite worked out just how bad many MPs expense claims really were, due to a lack of an account that attempted to take all available facts. And now I recognise the same problem with the Marriage tax debate. The difference is, I feel, that I am actually equipped to attempt to set the record straight, in my own small way.

This is because the debate is largely conceptual. It relates to the “could be” far more than it does the “has been”, as the original recognition of marriage was phased out during the Tories’ last spell in government, embarrassingly for them. The original system was discredited rather well by the article, but one thing is worth bearing in mind before you think this makes it an open and shut case.

The Tories have not specified exactly how they plan to recognise marriage in the tax system*. So immediately the debate becomes a whole lot wider — and none of the arguments against the original system bear much weight until they clarify their thinking (conveniently).

Now, the FT article in question largely attacks the practical arguments — for example that recognition will improve society directly, by increasing marriage through financial incentives. I can’t say that I can think of many good arguments for this; it seems like a most basic form of confusing correlation with causation to even suggest that the better statistics for married couples mean that more people getting married will result in better statistics. I also find myself sceptical that couples tying the knot because of money is a good thing: remember the Matt cartoon that very pithily summed the merits of the idea up by picturing a man proposing marriage saying “You, whatever your name is, think of the tax breaks available to married couples”.

But this actually only addresses one argument, which assumes that the intention of the policy is to create financial incentives for people to marry, and that this will be good for society. Furthermore, as Chris Giles points out, the elasticity of marriage to a tax break is unlikely to be very high. Saying “it probably won’t work” only works if you know what the policy is intended to do to begin with, and as this is the Tories, this is far from clear.

There are at least two other arguments one could apply that immediately come to mind: fairness, and social engineering. The fairness argument is one that Cameron made in the conference speech before last; it worked reasonably well as a populist argument, as you can’t really argue that it’s unreasonable to want to reward people for turning love into commitment.

Fortunately for Tory-bashers, the already mentioned pitfalls to creating shallow incentives provide a reasonably good rebuttal, however unlikely it is that they would arise to begin with; moreover, a one-off reward for Marriage might seem like a reasonable wedding present, but a lifetime of tax breaks that might cost the Exchequer more than £5 bn P/A seems like extravagance.

However, there is arguably more to the argument than this. Indeed, I would probably say that Cameron’s was a relatively trivial attempt, probably due to not wishing to stray into controversial waters. There is a whole other dimension when it comes to fairness. This is where the FT article falls down, because it blithely assumes that the only consideration when it comes to fairness is redistribution. But it isn’t, because you also have to consider the personal dimension. Redistribution will, ultimately, depend on the average distribution of the tax burden, but fairness will relate to individual circumstances as well as general ones.

And how couples are taxed is an incredibly contentious debate when it comes to individual circumstances. This has little to do with the average distribution of the tax burden, but everything to do with the specific differences between how different families are supported and taxed. And from this perspective, despite the somewhat fatuous argument about redistribution that Chris Giles makes (which could easily be counterbalanced by changes to other taxes), I can see a very good argument even for the incredibly flawed Iain Duncain Smith proposal for a transferable allowance. Because couples where one parent decides to dedicate themselves mostly to raising children, with the other supporting them, are at a significant financial disadvantage to couples where both parents work.

I think that there’s a powerful moral argument against the idea that family work is not employment. It is, it just isn’t paid. And like all voluntary work, it’s easy to undervalue its indirect social impact. The argument gains greater weight if you devise a sensible policy which rewards all parents, not just the richer ones, and when you take into account the potential for social engineering. For investing in marriage doesn’t only mean commitment of couples to each other, it’s commitment to their family, something which cannot be achieved through child benefits alone. And this could be a powerful investment in the long run. Indeed, the idea has the potential** to transform attitudes towards family, so we view investing time in a successful personal life as equally important to investing time in successful economic activity.

People who argue that the direct economic gain or loss is the important thing miss out on what is obvious to anyone who takes a wider view: that our personal lives directly inform our economic activity. It is incredibly dangerous to think that any personal welfare that comes at the cost of economic activity is automatically loss to the economy in the long-run. An investment in better personal welfare could lead to surprising results. If we give it time, of course.

*Well, Iain Duncan Smith has. But he’s head of a think tank, rather than a frontbencher.

**Unlikely, of course, to be achievable.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: