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Memo to the next UK Prime Minister: the Taxation of Imputed Income   (Protagoras, May 23, 2007)

Protagoras is the pseudonym of a well connected UK politician. He was handed this extract of a few pages from a briefing paper to the next UK Prime Minister by a senior civil servant who must, like Protagoras himself, remain anonymous. It is, alas, only a few pages, and it starts in the middle of a sentence whose opening we can only guess at.

.....taxation, social justice, communities, social cohesion.

The difficulty we as a community have in the UK is that a subtle form of tax evasion is taking root in the professional classes. It is clear that pressure on these classes is rising as a result of our committment to social justice. We have succeeded in our assault on occupational pensions, and they are largely wrecked. We have successfully raised the costs of private education, and have been equally successful in thwarting the efforts of professional parents to supplement the education offered by the state sector by teaching their children to read and write at home, by making these accomplishments less valuable.

You now no longer need to be able to read or write at all in the UK to be able to pass school leaving examinations, and it is a positive disadvantage in trying to gain entry to a university. This was a great achievement which no other nation has matched. We have also raised property taxes beyond previously known limits, and we have imposed a sales tax on homes, which means that every career enhancing move a professional makes benefits the Treasury. All this has had the desired effects, and Britain is now more socially just than it ever has been.

However, in response, there is now a trend for the professional classes to engage in a subtle form of tax evasion by staying put in their homes, and doing manual work themselves. This must be addressed. To understand the problem, consider what happens when a surgeon employs a plumber or builder to improve his house. He earns money by his work, on which he pays income tax at the maximum progressive rate. He also pays large national insurance contributions through his employer. He then pays the plumber. The plumber then in turn pays taxes on this income, and still more national insurance contributions. The result is a handsome return for the Treasury, which is funding the vital War on Terror, the War on Global Warming, as well as the public sector salaries and pensions which are so essential, Prime Minister, to your government's re-election in a few years time.

We now hear anecdotally that increasing numbers of surgeons, lawyers, writers and other professionals are starting to do manual work on their homes themselves. The results are devastating to community cohesion and fairness. They refuse to move house. They no longer do the work they are qualified to do, with qualifications whose acquisition the community has funded through our compulsory state-run education system. They no longer pay tradesmen. Tax collections are falling, and the consumer suffers as lowered supply of professional services increases the price. Such selfish anti social behaviour is typical of the privileged classes everywhere, and must be addressed. The question is, how?

Clearly, the remedy is to tax the labor employed in DIY work at the same rate as that which work in one's chosen profession is taxed. We have to adopt the principle that if a surgeon makes an hourly rate of some hundreds or thousands per hour, if he chooses to employ his time in plumbing, that time must result in an imputed income of the same amount as if spent in the operating theatre, and so be taxed at his marginal rate. This will make it immaterial to the surgeon from a financial point of view whether he works on his plumbing or on his patients, and he will choose to do the latter.

If he is so maladjusted as not to, we will have to work with him and support him. We have already obtained widespread acceptance of the principle of intervention to support dysfunctional families and personalities before they offend, rather than waiting till after. In fact, we are targetting even unborn children who are at risk of anti-social tendencies, for support. We are sure they will welcome this evidence of the caring society we have become, when they are old enough to appreciate it. Right now of course they are in the womb, so it is hard for them to express the enthusiasm we know they feel.

We have already introduced the concept of compulsory treatment for mental disorders. If we find evidence of irrational anti-social squandering of skills without even an economic motive, we will have no difficulty in gaining acceptance of intervention to help such individuals adjust better to their social obligations. Possibly our Family Courts, meeting in secret and with no right of appeal, should be used to relieve a recalcitrant surgeon's wife and children of the burden of association with such a problematic personality, without any risk of inflammatory publicity from the press. As you know, Prime Minister, one of the ways in which we in Britain lead the world in the protection of children and families, is that it is unlawful to even allude publicly or privately to the fact that a person has been before the Family Court, and neither its proceedings nor judgments are reported.

Possibly his local town council could take out an Anti Social Behaviour Order against him. These are now generally accepted and being taken out in large numbers all over the country. The great advantage of them is that they can be used to make conduct criminal for him, that is neither against the law in itself, nor criminal for anyone else. So it is easy to make it a criminal offense for a surgeon to plumb.

It may be objected to this, that we have no way of knowing what our surgeon does in the privacy of his own home. This is a mistake. To track the epidemic of misuse of time by the professional classes we simply have to extend the principles of surveillance and community control which have been so successful outside the home, into the home.

You will recall, Prime Minister, that the UK is the most surveilled society in history, but only in the public domain. In the average day in the UK, the average citizen's movements and behaviour will be captured and recorded on tens or hundreds or increasingly thousands of security cameras, of which we now have 4.2 million installed.

But in the private domain we suffer from a disastrous surveillance gap. Well, we will simply rule that in exchange for education at higher levels, our population will agree to the installation of similar cameras in their homes. In this way, their tax returns can be audited for accuracy, and if we find them doing undeclared work on their homes, and thus obtaining undeclared imputed income, they can be subject to heavy penalties.

It may be felt that they will object to this violation of privacy. They will not. Those who behave responsibly and honourably will have nothing to hide. And the fact that there has been so little objection to our public surveillance, gives a strong indication that more private surveillance will not arouse objections.

We should also reflect that it is a misnomer to call behaviour at home private. The term "home" is full of misleading and anti-social connotations. We live in communities. We are not isolated individuals or family units. Nothing we do is of no interest or concern to our neighbours. The idea that we require or should be permitted a certain private space is one of the most appalling legacies of Thatcherism, and has led to epidemics of obesity and drunkeness and family breakdown all across the UK, despite the best efforts of your government to control it, by allowing the sale of liquor at all hours of the day and night, and working closely with the good citizens of the alcohol industry. Yes, Thatcherism has left a truly appalling legacy.

We can extend the principle of taxing imputed income still further in ways that will undoubtedly appeal to your government. For many years now, middle class and professional parents have been seeking to obtain unfair advantages by coaching their children at home in the basics of literacy and numeracy. We have prevented this giving them any advantage in school. However, when it comes to employment, their greater fluency has given them an edge in job interviews and later promotion. We can use the proposed surveillance system to stamp out this nefarious practice, so inimical to fairness and social justice. We will simply tax time spent coaching children in the same way as we propose taxing DIY work, or perhaps at even higher rates. Indeed, the propensity of the professional classes to spend excessive amounts of time reading, and too little time watching television, has long needed addressing. This source of social inequality can now be decisively remedied.

The opportunities from this proposal are in fact most exciting, though too numerous to go into fully in this brief paper. We may mention in passing that the inequality in book ownership among the social classes in the UK, long a concern to us, may be addressable through it. A minority of the population, the most reactionary of course, are buying far too many books. The current practice of growing one's own vegetables, thus obtaining an advantage in nutrition due to their freshness, and not giving employment to the worthy unionized staff of our great supermarket chains, could be solved. The inequalities in cooking expertise which result in some people in this country not buying their food prepared, a practice which threatens union jobs at our great food factories, as well as giving them an unfair nutritional advantage, can be reduced or eliminated. There is really no excuse for a surgeon's spending his time cooking, when he could be spending it operating, earning money, and paying taxes, and create jobs in the process. Nor is there any excuse for his spending his vacations quietly in his garden, when he could be taking a package holiday in Spain like everyone else, and thus provide increased employment in our world leading packaged holiday industry.

All this will be the subject of further papers in this series....

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