Fat Cat Freedom Day
Wednesday, June 8th, 2005The Adam Smith Institute (ASI) hit the headlines last week with their claim that the 31st May marked this year’s ‘Tax Freedom Day‘. For those who missed it, ‘Tax Freedom Day’ is calculated by dividing the country’s total tax bill by its national income and then converting the percentage - 42% this year - into calendar days. According to ASI the resulting date marks the theoretical point in the year when we stop having to work for the government, rather than for ourselves. And, of course, the aim of the ASI in calculating it is to make us begrudge the amount of effort demanded on our behalf by the state.
Public finances are regarded as a notoriously dull issue but Tax Freedom Day captures the imagination because the thought of working five months of the year simply to pay tax can even give a firm advocate of the welfare state reason to pause for thought. Eamonn Butler, Director of the ASI, used the opportunity to compare Gordon Brown unfavourably with a medieval baron, arguing ‘the average serf in the Middle Ages only had to work four months of the year in the service of even the most rapacious feudal lord’.
As was to be expected, the right wing press lapped it up. The Sun were outraged that Gordon Brown had ‘effectively gobbled up every penny we have collectively earned for five full months’ in order to pay for his ‘lavish spending sprees’. The Evening Standard celebrated it as the day ‘employees will finally stop working for Gordon Brown today and start earning for themselves’. In The Times, Stephen Pollard told us to ‘Crack open the Krug’ to celebrate, but then had second thoughts and said ‘far from celebrating, we ought to be commiserating with each other. Last year, we could start keeping our own money three days earlier; when Labour took office in 1997, Tax Freedom Day fell on May 25′.
Freedom is a complex term with many contested meanings but it hardly makes sense in this context, not least because the vast majority of the money Gordon Brown has ‘gobbled up’ comes directly back to us or to our friends and family. But by expressing tax in days of work it Tax Freedom Day not only gives a very complex issue a simple personal dimension, it also emphasises the least popular dimensions - tax and work - of an equation that needs to be balanced with the public goods that emanate from them. What, then, if we were to perform the same trick with public spending? Rather than suggesting a feudal burden we need to be freed from, perhaps the figures might highlight how well we collectively use our time to support our families and serve our local communities?
For instance, it turns out we each work just one day a year to fund our public libraries, museums, galleries and concert venues. That seems remarkably good value to me - put like this it doesn’t seem too much to ask. Similarly, we might want to spend more than a mere 32 seconds a day of our time funding medical research - heck, why not go for a whole minute?
No doubt it’s the welfare state that the ASI are really objecting to, but if we break social spending down into discrete programme headings then the billions Gordon Brown is ‘gobbling’ for his ’spending sprees’ seem more like modest contributions of our time to help family members or close friends and neighbours. Consider the biggest single item of social security spending - the state pension. It turns out we work just seventeen days a year to provide income for our parents or grandparents. Is that too much to ask? Perhaps ASI staff don’t get on with their elder relatives, but it seems a bit much to begrudge them the rewards from one-and-a-half days out of every calendar month. Perhaps they have more pressing needs for their money - like the Krug they keep cracking open?
It’s a similar picture for schools, where just under a day month is worked to fund our primary and secondary schools. Most parents would view this as an absolute bargain. While the NHS commands a much bigger chunk of our time - some 25 days this year - this still compares very favourably to the private sector driven system in the USA that swallows over 50 days a year of collective effort in order to satisfy its cash hungry insurance funds.
Almost all of us will, at some point, make use of our public schools, hospitals, libraries, museums and state pensions and even if we do not use them at this particular moment in time then it is likely someone in our family will be. Personalising public spending by converting it into days of effort worked towards supporting ourselves or our own families helps reconnect it with the people in our own lives we are supporting. It also reveals the often paltry investments we make in some key areas of direct concern to us. For instance, we might want to spend more than just fifteen minutes a day working on environmental protection.
Of course, while primarily acting as kind of intergenerational savings bank, the state also acts to redistribute income between the rich and the poor and it is probably this that the ASI objects most strongly to. However, if we use the same methodology to demonstrate how long the nation works to fund the incomes of different social groups then it actually makes the case for redistribution remarkably well.
According to the latest published data (for 2002-3), the richest 10% of the country commanded 32% of our national income while the poorest 10% received just 1%. These figures are stark, but if we convert them into days it turns out that the country as a whole worked until April 25 to pay the incomes of the richest 10%. Unlike the taxes taken by Gordon Brown, I imagine much of this money really was ‘gobbled up’ in ’spending sprees’. Curiously enough, it is less than a week short of the full four months of income only the most rapacious feudal lords asked us to hand over in the Middle Ages. Meanwhile, the nation worked just four days to produce the income of the poorest 10%.
Even after Gordon Brown intervened to redistribute some of this cash the picture changed little: in a picture reminiscent of a Dickensian tale we only turned our attentions to the poorest 10% on Christmas Eve - working a paltry eight days to raise their income - and while the richest 10% generously gave up two weeks of national effort compared to their pre-tax incomes they still asked us to work the first 101 days of the year for them.
Put differently, it wasn’t until April 12 that we had finally reached the theoretical point in the year at which we stopped working for the rich and started working for ourselves. Let’s call this ‘Fat Cat Freedom Day’. However, far from celebrating, we ought to be commiserating with each other. It used to fall so much earlier than this in the past.