"In this world nothing can be said to be certain, except death and taxes"
Tax might not sound interesting or exciting to most people, but it affects all of us.
In this episode, we explore what paying taxes actually means, and how it affects our relationship with the government and society.
And we'll do all of this through the story of two pen-pals, Arlette from Paris, France, and John from Austin, Texas.
[00:00:00] Hello, hello hello, and welcome to English Learning for Curious Minds, by Leonardo English.
[00:00:12] The show where you can listen to fascinating stories, and learn weird and wonderful things about the world at the same time as improving your English.
[00:00:22] I'm Alastair Budge and today we are going to talk about Tax.
[00:00:28] Now, the word ‘tax’ provokes differing reactions to different people.
[00:00:34] Boredom. Fear. Theft. Duty.
[00:00:39] Whatever one thinks of tax, it’s something that none of us can escape.
[00:00:45] And as Benjamin Franklin famously said, all the way back in 1726 “In this world nothing can be said to be certain, except death and taxes.”
[00:00:58] So today we are going to dive right into it.
[00:01:01] From a very brief history of taxes, to how different countries approach the question of how much is the right amount of tax to pay, and what effects this has on the society we live in.
[00:01:16] It won’t all be theoretical though, we'll learn about all of this through the story of two pen-pals, Arlette from Paris, and John from Austin, Texas.
[00:01:27] We’ll also confront the increasingly popular, but controversial, idea of a wealth tax.
[00:01:34] Before we get right into that though, let me quickly remind you that you can follow along to this episode with the subtitles, the transcript and its key vocabulary, so you don’t miss a word and build up your vocabulary as you go, over on the website, which is leonardoenglish.com.
[00:01:53] This is also where you can also check out becoming a member of Leonardo English, and join a community of curious minds from all over the world, doing meetups, exchanging ideas, and generally, improving their English in a more interesting way.
[00:02:10] So if that's of interest, and I certainly hope it is, then the place to go to is leonardoenglish.com.
[00:02:19] OK then, tax.
[00:02:22] Throughout history, going all the way back to the ancient Egyptians in the year 3000 BC, people in power have required that people contribute to the society they live in, sometimes through labour, through working, or through direct payments, through money.
[00:02:42] This episode would go on for hours, days, perhaps even weeks if we talked about the entire lengthy history of taxation, but the broad idea hasn’t really changed.
[00:02:55] Whoever is in charge of a society, be that the ancient Egyptian Pharaohs, or an elected government in the year 2021, it provides certain services to its people.
[00:03:09] To do that, it needs money or labour, and it requires people or businesses to give it to them.
[00:03:16] Of course, you know that.
[00:03:18] You are one of the billions of people who pay these taxes, through your income, through the money you earn as a salary, through things you consume, things you buy in shops, and through everything from the tax that businesses pay on profits through to taxes you pay on your houses, there are thousands of different types of taxes that people pay all over the world.
[00:03:43] Today though we are going to focus on tax on income, the taxes that you pay on the money you make.
[00:03:52] This is going to be our focus because it is normally the largest tax, in most countries the majority of the tax that you pay will be income tax.
[00:04:02] In the UK, the combination of income tax and something called social security contributions makes up 41% of all the tax revenues that the government makes.
[00:04:15] And, as I’m sure we all know, depending on where you live, and how much money you make, the amount you pay in taxes can vary greatly.
[00:04:25] If you live in Europe, your taxes are relatively high, compared to the rest of the world.
[00:04:31] If you live in a country like Bermuda or the United Arab Emirates, or even if you live in the US state of Texas, your taxes are very low, sometimes completely non-existent.
[00:04:46] These differences start small, but as people earn more, they become a lot more extreme.
[00:04:52] Let’s dig down into a couple of examples here, to illustrate this point.
[00:04:58] Let’s take two pen-pals, Arlette in Paris, and John, who lives in Austin, Texas.
[00:05:05] For the sake of simplicity, let’s say that they both earn a salary of €50,000, which is around $60,000 for our friend John in Texas.
[00:05:18] John is going to end up paying just under 14% of his income in federal income taxes, taxes to the central government. Importantly, he doesn’t pay any state income taxes, taxes to the state of Texas on his income.
[00:05:35] And he’ll pay just under 8% in Social Security and Medicare, meaning he will pay about 21% of his total salary in taxes.
[00:05:47] Meanwhile his pen-pal over in Paris, Arlette, if she is earning €50,000 will pay just under 27% of her salary in taxes.
[00:05:58] So, Arlette pays more, but not a vast amount more.
[00:06:04] Let’s say that both Arlette and John have some excellent luck, they get a fantastic promotion, and their salary doubles.
[00:06:13] Lucky them, they are now both earning €100,000 a year.
[00:06:19] John pays a little more as a percentage, now paying 24.2% of his salary in taxes.
[00:06:27] Meanwhile in Paris Arlette is paying around 35%.
[00:06:33] Now, as anyone who owns a business in France will know, the French system requires the company to pay extra social security contributions on top of the salary that they pay Arlette, which can easily be another 50%.
[00:06:50] So, lucky Arlette, her salary was €100,000.
[00:06:54] But the real cost of employing her for her company could reach €150,000, and from that, Arlette might only get €65,000 or so, less than half.
[00:07:08] Now, on a personal level, most people might like the idea of needing to pay fewer taxes, and having more money to spend at the end of the month.
[00:07:18] So you might think, lucky John in Texas.
[00:07:22] But John pays less, so he gets less.
[00:07:26] And ultimately, the question of what is the right amount of tax comes down to how much involvement you believe a government should have in the lives of its citizens.
[00:07:37] If you believe a government should do the bare minimum, keep low taxes, and require individuals to pay for almost everything, then you’d probably be happy with John in Texas.
[00:07:51] But if you think that as part of our social contract it’s the government’s job to redistribute money to create a more equal and prosperous society, then you’d probably be happy with Arlette in Paris.
[00:08:05] And when it comes to tax, there is obviously no right answer, no right number, it is the job of a government to set taxes at a level that allows them to deliver the services that their citizens expect.
[00:08:21] If we return to our friends Arlette and John, in Paris and Austin, we can see some differing expectations of what the government will and won’t do, in terms of getting involved with the lives of its citizens.
[00:08:37] Let’s go first to Texas, and to our friend John in Austin, who is happy to pay very low taxes, and zero state income taxes.
[00:08:47] We might think that his expectations about what the government will do to help him should be lower.
[00:08:54] But is this actually the case?
[00:08:57] Well, it certainly does seem so, and we can illustrate this point through a relatively recent example.
[00:09:05] You may remember that a huge storm hit Texas in February, and millions of houses were left without electricity.
[00:09:15] At the start, Texan politicians blamed renewable energy, saying that they couldn’t cope with the extreme weather.
[00:09:24] But further investigations revealed that one of the major reasons that the energy grid wasn’t able to cope with the surge in demand was because of the deregulation and privatisation of Texan energy that had taken place over the last two decades.
[00:09:44] Rather than opt for higher taxes and more government involvement, Texans had gone the other way.
[00:09:52] And when the storm hit, as the former Mayor of a Texan town wrote on Facebook, “No one owes you or your family anything; nor is it the local government’s responsibility to support you during trying times like this! Sink or swim, it’s your choice!”
[00:10:10] So, with taxes come expectations.
[00:10:13] If taxes are low, like they are in somewhere like Texas, then so are expectations. You pay the government relatively little, so you expect it to be involved relatively little in your life.
[00:10:27] And when taxes are higher, for example in France, with Arlette, so are expectations.
[00:10:34] As you might know, France takes great pride in providing for its citizens through good and bad.
[00:10:41] There’s generous support for the unemployed, it is very hard to fire someone, and French employees are entitled to very generous pensions, especially in the case of state employees.
[00:10:54] So, Arlette in France, because she pays so much more tax than John in Texas, especially with her great new pay rise, she is likely to be much more engaged, and have much higher expectations for things like healthcare, schooling, and transport.
[00:11:13] And if Arlette feels like she isn’t getting value for money, if the state isn’t delivering for her in the way that she feels it should, then she will probably be more frustrated than John in Texas.
[00:11:28] Again, we can see some examples of this in relatively recent French history.
[00:11:34] You may remember the Gilet Jaunes movement that started at the end of 2018.
[00:11:40] To briefly remind you what happened, around November 2018 there was a popular movement in France of people wearing bright yellow jackets who took to the streets.
[00:11:53] Initially, they were protesting a proposed new type of tax on fuel, but it was a reaction to what was felt to be a disproportionate tax burden on the lower and middle classes, they thought that taxes were too high on lower and middle earners, and not high enough on the richest in society.
[00:12:16] As some further background to this, the French president, Emanuelle Macron, had removed a wealth tax, which was a tax on wealth over €790,000.
[00:12:29] Against these rising prices and the view that French taxpayers weren't getting good enough value from the government, hundreds of thousands of people took to the streets, saying enough is enough.
[00:12:43] Eventually, Macron backed down, and agreed to many of the demands of the Gilets Jaunes.
[00:12:51] So, why is the Gilet Jaunes movement relevant to tax?
[00:12:57] Because it is a great example of the correlation between tax rates and citizen engagement, that the protestors were paying all this money in taxes yet they didn’t think the government was supporting them.
[00:13:12] Then, contrast that with the reaction in Texas, which was basically “you’re on your own, guys”.
[00:13:19] Now, this episode is certainly not meant to be saying that one system is better than the other, or that there is a right way to do taxation.
[00:13:29] Clearly, there are thousands of different views, and in a democracy we all have the ability to have our say by electing political parties that align best with whatever we believe.
[00:13:43] But what is certainly true in almost all countries is that taxation does create a much closer bond, a much closer relationship between the individual and the state.
[00:13:56] On one level, this is obvious - the more you pay for something, the more you are likely to care about its quality.
[00:14:04] But if there is a complete breakdown of this bond, if taxpayers don’t feel like they are getting value for money, then the more tax they pay, the more they are likely to express their dissatisfaction.
[00:14:20] The Gilet Jaunes protests may have been relatively peaceful, but throughout history there have been instances of riots, rebellions, and revolutions all due to people rising up against what they believed were unfair and unjust taxes.
[00:14:39] While, to repeat, there is no ‘right’ answer on tax, I’d like to end this episode with a brief discussion of a type of tax that has become more and more debated in recent years.
[00:14:54] A wealth tax, a tax on your total wealth, a tax on all of the stuff you have.
[00:15:00] Although there have been different versions of it proposed throughout history, it was brought back into discussion after the publication of a book by a French economist called Thomas Piketty, called Capital in the 21st Century.
[00:15:16] You may well have read the book - it has been translated into dozens of languages, and has sold millions of copies.
[00:15:24] In it, one of the main ideas proposed by Piketty is a global wealth tax, a tax on the richest people in the world, which would start at 0.1% and rise to 2% on large fortunes.
[00:15:39] It would be what’s called a progressive tax, so the more you had, the higher the percentage you would pay.
[00:15:47] And he also suggested a much higher top rate of income tax, with the government taking up to 80% of the income of the highest earners.
[00:15:57] I don’t think our friend John in Texas would like that idea very much.
[00:16:02] One of the reasons that Piketty’s book was so successful was that he wasn’t just someone on the street corner saying “we should raise taxes”, he was one of the world’s most respected economists, and his research was based on serious economic study.
[00:16:19] There were, of course, plenty of people who opposed it, saying that he had got it all wrong, and that his ideas would destroy economic growth.
[00:16:29] But it caused a lot of debate, and even by those who disagreed with it, it was taken seriously.
[00:16:36] When he published it, in 2013, it was referred to as ‘right time, right message’.
[00:16:44] Inequality had been increasing in much of the western world, particularly in the United States, and what Piketty was proposing was a solution based on economic theory, not just a political message.
[00:16:59] And since then, similar taxes have been proposed in countries one might have never thought would be open to a wealth tax.
[00:17:08] In the United States, the land of the brave and home of the free, Elizabeth Warren and two other Democratic senators proposed a wealth tax on the ultra wealthy.
[00:17:20] This one really was for the ultra ultra wealthy. it would only start at $50 million, meaning that if your net worth was less than $50 million, which is the case for 99.9% of Americans, you wouldn't have to pay it.
[00:17:36] Yet still, it was met with fierce resistance, labelled as an attack on American liberty, and yet another way for the federal government to get its hands on your hard-earned money.
[00:17:51] What the popularity of such ideas does tell us though is that the idea of tax is evolving, the idea of who should pay tax, and how much they should pay, is still very much up for discussion, both as the gaps between rich and poor grow wider, and as countries are figuring out how to pay the bill for the cost of COVID-19.
[00:18:17] There is of course no right answer, so I’ll leave you with two quotes about taxes, and you can choose which one you feel aligns more with your beliefs.
[00:18:28] We’ll start with the American Judge, Oliver Wendell Holmes Jr., who once said “I like to pay taxes. With them, I buy civilization.”
[00:18:38] Or, from another American, the TV broadcaster Arthur Godfrey, who once said “I am proud to be paying taxes in the United States. The only thing is I could be just as proud for half of the money.”
[00:18:54] OK then, that is it for today's episode on the actually quite interesting world of Tax.
[00:19:02] I hope it's been a thought-provoking one, that you've learnt something new, and whether it’s looking at your payslip at the end of the month, or doing a tax return at the end of the year, you might think about the numbers on there in a slightly different way.
[00:19:17] As always, I would love to know what you thought of this episode.
[00:19:21] What do you think of the tax system in your country?
[00:19:25] Would you rather pay a higher rate of tax and feel like you have a stronger bond with your fellow citizens, or would you rather pay lower taxes and be a master of your own destiny. I would love to know.
[00:19:39] For the members among you, you can head right in to our community forum, which is at community.leonardoenglish.com and get chatting away to other curious minds.
[00:19:50] And if you’re not yet a member of Leonardo English, then perhaps today is the day to do something about that.
[00:19:56] Membership of Leonardo English means unlocking all of our bonus episodes, learning with the transcripts, the subtitles and key vocabulary, and joining a community of curious minds from all over the world. It might just be the smartest learning decision you’ll take all year.
[00:20:14] And the place you can go for all of that is leonardoenglish.com
[00:20:20] You've been listening to English Learning for Curious Minds, by Leonardo English.
[00:20:25] I'm Alastair Budge, you stay safe, and I'll catch you in the next episode.
[END OF EPISODE]
[00:00:00] Hello, hello hello, and welcome to English Learning for Curious Minds, by Leonardo English.
[00:00:12] The show where you can listen to fascinating stories, and learn weird and wonderful things about the world at the same time as improving your English.
[00:00:22] I'm Alastair Budge and today we are going to talk about Tax.
[00:00:28] Now, the word ‘tax’ provokes differing reactions to different people.
[00:00:34] Boredom. Fear. Theft. Duty.
[00:00:39] Whatever one thinks of tax, it’s something that none of us can escape.
[00:00:45] And as Benjamin Franklin famously said, all the way back in 1726 “In this world nothing can be said to be certain, except death and taxes.”
[00:00:58] So today we are going to dive right into it.
[00:01:01] From a very brief history of taxes, to how different countries approach the question of how much is the right amount of tax to pay, and what effects this has on the society we live in.
[00:01:16] It won’t all be theoretical though, we'll learn about all of this through the story of two pen-pals, Arlette from Paris, and John from Austin, Texas.
[00:01:27] We’ll also confront the increasingly popular, but controversial, idea of a wealth tax.
[00:01:34] Before we get right into that though, let me quickly remind you that you can follow along to this episode with the subtitles, the transcript and its key vocabulary, so you don’t miss a word and build up your vocabulary as you go, over on the website, which is leonardoenglish.com.
[00:01:53] This is also where you can also check out becoming a member of Leonardo English, and join a community of curious minds from all over the world, doing meetups, exchanging ideas, and generally, improving their English in a more interesting way.
[00:02:10] So if that's of interest, and I certainly hope it is, then the place to go to is leonardoenglish.com.
[00:02:19] OK then, tax.
[00:02:22] Throughout history, going all the way back to the ancient Egyptians in the year 3000 BC, people in power have required that people contribute to the society they live in, sometimes through labour, through working, or through direct payments, through money.
[00:02:42] This episode would go on for hours, days, perhaps even weeks if we talked about the entire lengthy history of taxation, but the broad idea hasn’t really changed.
[00:02:55] Whoever is in charge of a society, be that the ancient Egyptian Pharaohs, or an elected government in the year 2021, it provides certain services to its people.
[00:03:09] To do that, it needs money or labour, and it requires people or businesses to give it to them.
[00:03:16] Of course, you know that.
[00:03:18] You are one of the billions of people who pay these taxes, through your income, through the money you earn as a salary, through things you consume, things you buy in shops, and through everything from the tax that businesses pay on profits through to taxes you pay on your houses, there are thousands of different types of taxes that people pay all over the world.
[00:03:43] Today though we are going to focus on tax on income, the taxes that you pay on the money you make.
[00:03:52] This is going to be our focus because it is normally the largest tax, in most countries the majority of the tax that you pay will be income tax.
[00:04:02] In the UK, the combination of income tax and something called social security contributions makes up 41% of all the tax revenues that the government makes.
[00:04:15] And, as I’m sure we all know, depending on where you live, and how much money you make, the amount you pay in taxes can vary greatly.
[00:04:25] If you live in Europe, your taxes are relatively high, compared to the rest of the world.
[00:04:31] If you live in a country like Bermuda or the United Arab Emirates, or even if you live in the US state of Texas, your taxes are very low, sometimes completely non-existent.
[00:04:46] These differences start small, but as people earn more, they become a lot more extreme.
[00:04:52] Let’s dig down into a couple of examples here, to illustrate this point.
[00:04:58] Let’s take two pen-pals, Arlette in Paris, and John, who lives in Austin, Texas.
[00:05:05] For the sake of simplicity, let’s say that they both earn a salary of €50,000, which is around $60,000 for our friend John in Texas.
[00:05:18] John is going to end up paying just under 14% of his income in federal income taxes, taxes to the central government. Importantly, he doesn’t pay any state income taxes, taxes to the state of Texas on his income.
[00:05:35] And he’ll pay just under 8% in Social Security and Medicare, meaning he will pay about 21% of his total salary in taxes.
[00:05:47] Meanwhile his pen-pal over in Paris, Arlette, if she is earning €50,000 will pay just under 27% of her salary in taxes.
[00:05:58] So, Arlette pays more, but not a vast amount more.
[00:06:04] Let’s say that both Arlette and John have some excellent luck, they get a fantastic promotion, and their salary doubles.
[00:06:13] Lucky them, they are now both earning €100,000 a year.
[00:06:19] John pays a little more as a percentage, now paying 24.2% of his salary in taxes.
[00:06:27] Meanwhile in Paris Arlette is paying around 35%.
[00:06:33] Now, as anyone who owns a business in France will know, the French system requires the company to pay extra social security contributions on top of the salary that they pay Arlette, which can easily be another 50%.
[00:06:50] So, lucky Arlette, her salary was €100,000.
[00:06:54] But the real cost of employing her for her company could reach €150,000, and from that, Arlette might only get €65,000 or so, less than half.
[00:07:08] Now, on a personal level, most people might like the idea of needing to pay fewer taxes, and having more money to spend at the end of the month.
[00:07:18] So you might think, lucky John in Texas.
[00:07:22] But John pays less, so he gets less.
[00:07:26] And ultimately, the question of what is the right amount of tax comes down to how much involvement you believe a government should have in the lives of its citizens.
[00:07:37] If you believe a government should do the bare minimum, keep low taxes, and require individuals to pay for almost everything, then you’d probably be happy with John in Texas.
[00:07:51] But if you think that as part of our social contract it’s the government’s job to redistribute money to create a more equal and prosperous society, then you’d probably be happy with Arlette in Paris.
[00:08:05] And when it comes to tax, there is obviously no right answer, no right number, it is the job of a government to set taxes at a level that allows them to deliver the services that their citizens expect.
[00:08:21] If we return to our friends Arlette and John, in Paris and Austin, we can see some differing expectations of what the government will and won’t do, in terms of getting involved with the lives of its citizens.
[00:08:37] Let’s go first to Texas, and to our friend John in Austin, who is happy to pay very low taxes, and zero state income taxes.
[00:08:47] We might think that his expectations about what the government will do to help him should be lower.
[00:08:54] But is this actually the case?
[00:08:57] Well, it certainly does seem so, and we can illustrate this point through a relatively recent example.
[00:09:05] You may remember that a huge storm hit Texas in February, and millions of houses were left without electricity.
[00:09:15] At the start, Texan politicians blamed renewable energy, saying that they couldn’t cope with the extreme weather.
[00:09:24] But further investigations revealed that one of the major reasons that the energy grid wasn’t able to cope with the surge in demand was because of the deregulation and privatisation of Texan energy that had taken place over the last two decades.
[00:09:44] Rather than opt for higher taxes and more government involvement, Texans had gone the other way.
[00:09:52] And when the storm hit, as the former Mayor of a Texan town wrote on Facebook, “No one owes you or your family anything; nor is it the local government’s responsibility to support you during trying times like this! Sink or swim, it’s your choice!”
[00:10:10] So, with taxes come expectations.
[00:10:13] If taxes are low, like they are in somewhere like Texas, then so are expectations. You pay the government relatively little, so you expect it to be involved relatively little in your life.
[00:10:27] And when taxes are higher, for example in France, with Arlette, so are expectations.
[00:10:34] As you might know, France takes great pride in providing for its citizens through good and bad.
[00:10:41] There’s generous support for the unemployed, it is very hard to fire someone, and French employees are entitled to very generous pensions, especially in the case of state employees.
[00:10:54] So, Arlette in France, because she pays so much more tax than John in Texas, especially with her great new pay rise, she is likely to be much more engaged, and have much higher expectations for things like healthcare, schooling, and transport.
[00:11:13] And if Arlette feels like she isn’t getting value for money, if the state isn’t delivering for her in the way that she feels it should, then she will probably be more frustrated than John in Texas.
[00:11:28] Again, we can see some examples of this in relatively recent French history.
[00:11:34] You may remember the Gilet Jaunes movement that started at the end of 2018.
[00:11:40] To briefly remind you what happened, around November 2018 there was a popular movement in France of people wearing bright yellow jackets who took to the streets.
[00:11:53] Initially, they were protesting a proposed new type of tax on fuel, but it was a reaction to what was felt to be a disproportionate tax burden on the lower and middle classes, they thought that taxes were too high on lower and middle earners, and not high enough on the richest in society.
[00:12:16] As some further background to this, the French president, Emanuelle Macron, had removed a wealth tax, which was a tax on wealth over €790,000.
[00:12:29] Against these rising prices and the view that French taxpayers weren't getting good enough value from the government, hundreds of thousands of people took to the streets, saying enough is enough.
[00:12:43] Eventually, Macron backed down, and agreed to many of the demands of the Gilets Jaunes.
[00:12:51] So, why is the Gilet Jaunes movement relevant to tax?
[00:12:57] Because it is a great example of the correlation between tax rates and citizen engagement, that the protestors were paying all this money in taxes yet they didn’t think the government was supporting them.
[00:13:12] Then, contrast that with the reaction in Texas, which was basically “you’re on your own, guys”.
[00:13:19] Now, this episode is certainly not meant to be saying that one system is better than the other, or that there is a right way to do taxation.
[00:13:29] Clearly, there are thousands of different views, and in a democracy we all have the ability to have our say by electing political parties that align best with whatever we believe.
[00:13:43] But what is certainly true in almost all countries is that taxation does create a much closer bond, a much closer relationship between the individual and the state.
[00:13:56] On one level, this is obvious - the more you pay for something, the more you are likely to care about its quality.
[00:14:04] But if there is a complete breakdown of this bond, if taxpayers don’t feel like they are getting value for money, then the more tax they pay, the more they are likely to express their dissatisfaction.
[00:14:20] The Gilet Jaunes protests may have been relatively peaceful, but throughout history there have been instances of riots, rebellions, and revolutions all due to people rising up against what they believed were unfair and unjust taxes.
[00:14:39] While, to repeat, there is no ‘right’ answer on tax, I’d like to end this episode with a brief discussion of a type of tax that has become more and more debated in recent years.
[00:14:54] A wealth tax, a tax on your total wealth, a tax on all of the stuff you have.
[00:15:00] Although there have been different versions of it proposed throughout history, it was brought back into discussion after the publication of a book by a French economist called Thomas Piketty, called Capital in the 21st Century.
[00:15:16] You may well have read the book - it has been translated into dozens of languages, and has sold millions of copies.
[00:15:24] In it, one of the main ideas proposed by Piketty is a global wealth tax, a tax on the richest people in the world, which would start at 0.1% and rise to 2% on large fortunes.
[00:15:39] It would be what’s called a progressive tax, so the more you had, the higher the percentage you would pay.
[00:15:47] And he also suggested a much higher top rate of income tax, with the government taking up to 80% of the income of the highest earners.
[00:15:57] I don’t think our friend John in Texas would like that idea very much.
[00:16:02] One of the reasons that Piketty’s book was so successful was that he wasn’t just someone on the street corner saying “we should raise taxes”, he was one of the world’s most respected economists, and his research was based on serious economic study.
[00:16:19] There were, of course, plenty of people who opposed it, saying that he had got it all wrong, and that his ideas would destroy economic growth.
[00:16:29] But it caused a lot of debate, and even by those who disagreed with it, it was taken seriously.
[00:16:36] When he published it, in 2013, it was referred to as ‘right time, right message’.
[00:16:44] Inequality had been increasing in much of the western world, particularly in the United States, and what Piketty was proposing was a solution based on economic theory, not just a political message.
[00:16:59] And since then, similar taxes have been proposed in countries one might have never thought would be open to a wealth tax.
[00:17:08] In the United States, the land of the brave and home of the free, Elizabeth Warren and two other Democratic senators proposed a wealth tax on the ultra wealthy.
[00:17:20] This one really was for the ultra ultra wealthy. it would only start at $50 million, meaning that if your net worth was less than $50 million, which is the case for 99.9% of Americans, you wouldn't have to pay it.
[00:17:36] Yet still, it was met with fierce resistance, labelled as an attack on American liberty, and yet another way for the federal government to get its hands on your hard-earned money.
[00:17:51] What the popularity of such ideas does tell us though is that the idea of tax is evolving, the idea of who should pay tax, and how much they should pay, is still very much up for discussion, both as the gaps between rich and poor grow wider, and as countries are figuring out how to pay the bill for the cost of COVID-19.
[00:18:17] There is of course no right answer, so I’ll leave you with two quotes about taxes, and you can choose which one you feel aligns more with your beliefs.
[00:18:28] We’ll start with the American Judge, Oliver Wendell Holmes Jr., who once said “I like to pay taxes. With them, I buy civilization.”
[00:18:38] Or, from another American, the TV broadcaster Arthur Godfrey, who once said “I am proud to be paying taxes in the United States. The only thing is I could be just as proud for half of the money.”
[00:18:54] OK then, that is it for today's episode on the actually quite interesting world of Tax.
[00:19:02] I hope it's been a thought-provoking one, that you've learnt something new, and whether it’s looking at your payslip at the end of the month, or doing a tax return at the end of the year, you might think about the numbers on there in a slightly different way.
[00:19:17] As always, I would love to know what you thought of this episode.
[00:19:21] What do you think of the tax system in your country?
[00:19:25] Would you rather pay a higher rate of tax and feel like you have a stronger bond with your fellow citizens, or would you rather pay lower taxes and be a master of your own destiny. I would love to know.
[00:19:39] For the members among you, you can head right in to our community forum, which is at community.leonardoenglish.com and get chatting away to other curious minds.
[00:19:50] And if you’re not yet a member of Leonardo English, then perhaps today is the day to do something about that.
[00:19:56] Membership of Leonardo English means unlocking all of our bonus episodes, learning with the transcripts, the subtitles and key vocabulary, and joining a community of curious minds from all over the world. It might just be the smartest learning decision you’ll take all year.
[00:20:14] And the place you can go for all of that is leonardoenglish.com
[00:20:20] You've been listening to English Learning for Curious Minds, by Leonardo English.
[00:20:25] I'm Alastair Budge, you stay safe, and I'll catch you in the next episode.
[END OF EPISODE]
[00:00:00] Hello, hello hello, and welcome to English Learning for Curious Minds, by Leonardo English.
[00:00:12] The show where you can listen to fascinating stories, and learn weird and wonderful things about the world at the same time as improving your English.
[00:00:22] I'm Alastair Budge and today we are going to talk about Tax.
[00:00:28] Now, the word ‘tax’ provokes differing reactions to different people.
[00:00:34] Boredom. Fear. Theft. Duty.
[00:00:39] Whatever one thinks of tax, it’s something that none of us can escape.
[00:00:45] And as Benjamin Franklin famously said, all the way back in 1726 “In this world nothing can be said to be certain, except death and taxes.”
[00:00:58] So today we are going to dive right into it.
[00:01:01] From a very brief history of taxes, to how different countries approach the question of how much is the right amount of tax to pay, and what effects this has on the society we live in.
[00:01:16] It won’t all be theoretical though, we'll learn about all of this through the story of two pen-pals, Arlette from Paris, and John from Austin, Texas.
[00:01:27] We’ll also confront the increasingly popular, but controversial, idea of a wealth tax.
[00:01:34] Before we get right into that though, let me quickly remind you that you can follow along to this episode with the subtitles, the transcript and its key vocabulary, so you don’t miss a word and build up your vocabulary as you go, over on the website, which is leonardoenglish.com.
[00:01:53] This is also where you can also check out becoming a member of Leonardo English, and join a community of curious minds from all over the world, doing meetups, exchanging ideas, and generally, improving their English in a more interesting way.
[00:02:10] So if that's of interest, and I certainly hope it is, then the place to go to is leonardoenglish.com.
[00:02:19] OK then, tax.
[00:02:22] Throughout history, going all the way back to the ancient Egyptians in the year 3000 BC, people in power have required that people contribute to the society they live in, sometimes through labour, through working, or through direct payments, through money.
[00:02:42] This episode would go on for hours, days, perhaps even weeks if we talked about the entire lengthy history of taxation, but the broad idea hasn’t really changed.
[00:02:55] Whoever is in charge of a society, be that the ancient Egyptian Pharaohs, or an elected government in the year 2021, it provides certain services to its people.
[00:03:09] To do that, it needs money or labour, and it requires people or businesses to give it to them.
[00:03:16] Of course, you know that.
[00:03:18] You are one of the billions of people who pay these taxes, through your income, through the money you earn as a salary, through things you consume, things you buy in shops, and through everything from the tax that businesses pay on profits through to taxes you pay on your houses, there are thousands of different types of taxes that people pay all over the world.
[00:03:43] Today though we are going to focus on tax on income, the taxes that you pay on the money you make.
[00:03:52] This is going to be our focus because it is normally the largest tax, in most countries the majority of the tax that you pay will be income tax.
[00:04:02] In the UK, the combination of income tax and something called social security contributions makes up 41% of all the tax revenues that the government makes.
[00:04:15] And, as I’m sure we all know, depending on where you live, and how much money you make, the amount you pay in taxes can vary greatly.
[00:04:25] If you live in Europe, your taxes are relatively high, compared to the rest of the world.
[00:04:31] If you live in a country like Bermuda or the United Arab Emirates, or even if you live in the US state of Texas, your taxes are very low, sometimes completely non-existent.
[00:04:46] These differences start small, but as people earn more, they become a lot more extreme.
[00:04:52] Let’s dig down into a couple of examples here, to illustrate this point.
[00:04:58] Let’s take two pen-pals, Arlette in Paris, and John, who lives in Austin, Texas.
[00:05:05] For the sake of simplicity, let’s say that they both earn a salary of €50,000, which is around $60,000 for our friend John in Texas.
[00:05:18] John is going to end up paying just under 14% of his income in federal income taxes, taxes to the central government. Importantly, he doesn’t pay any state income taxes, taxes to the state of Texas on his income.
[00:05:35] And he’ll pay just under 8% in Social Security and Medicare, meaning he will pay about 21% of his total salary in taxes.
[00:05:47] Meanwhile his pen-pal over in Paris, Arlette, if she is earning €50,000 will pay just under 27% of her salary in taxes.
[00:05:58] So, Arlette pays more, but not a vast amount more.
[00:06:04] Let’s say that both Arlette and John have some excellent luck, they get a fantastic promotion, and their salary doubles.
[00:06:13] Lucky them, they are now both earning €100,000 a year.
[00:06:19] John pays a little more as a percentage, now paying 24.2% of his salary in taxes.
[00:06:27] Meanwhile in Paris Arlette is paying around 35%.
[00:06:33] Now, as anyone who owns a business in France will know, the French system requires the company to pay extra social security contributions on top of the salary that they pay Arlette, which can easily be another 50%.
[00:06:50] So, lucky Arlette, her salary was €100,000.
[00:06:54] But the real cost of employing her for her company could reach €150,000, and from that, Arlette might only get €65,000 or so, less than half.
[00:07:08] Now, on a personal level, most people might like the idea of needing to pay fewer taxes, and having more money to spend at the end of the month.
[00:07:18] So you might think, lucky John in Texas.
[00:07:22] But John pays less, so he gets less.
[00:07:26] And ultimately, the question of what is the right amount of tax comes down to how much involvement you believe a government should have in the lives of its citizens.
[00:07:37] If you believe a government should do the bare minimum, keep low taxes, and require individuals to pay for almost everything, then you’d probably be happy with John in Texas.
[00:07:51] But if you think that as part of our social contract it’s the government’s job to redistribute money to create a more equal and prosperous society, then you’d probably be happy with Arlette in Paris.
[00:08:05] And when it comes to tax, there is obviously no right answer, no right number, it is the job of a government to set taxes at a level that allows them to deliver the services that their citizens expect.
[00:08:21] If we return to our friends Arlette and John, in Paris and Austin, we can see some differing expectations of what the government will and won’t do, in terms of getting involved with the lives of its citizens.
[00:08:37] Let’s go first to Texas, and to our friend John in Austin, who is happy to pay very low taxes, and zero state income taxes.
[00:08:47] We might think that his expectations about what the government will do to help him should be lower.
[00:08:54] But is this actually the case?
[00:08:57] Well, it certainly does seem so, and we can illustrate this point through a relatively recent example.
[00:09:05] You may remember that a huge storm hit Texas in February, and millions of houses were left without electricity.
[00:09:15] At the start, Texan politicians blamed renewable energy, saying that they couldn’t cope with the extreme weather.
[00:09:24] But further investigations revealed that one of the major reasons that the energy grid wasn’t able to cope with the surge in demand was because of the deregulation and privatisation of Texan energy that had taken place over the last two decades.
[00:09:44] Rather than opt for higher taxes and more government involvement, Texans had gone the other way.
[00:09:52] And when the storm hit, as the former Mayor of a Texan town wrote on Facebook, “No one owes you or your family anything; nor is it the local government’s responsibility to support you during trying times like this! Sink or swim, it’s your choice!”
[00:10:10] So, with taxes come expectations.
[00:10:13] If taxes are low, like they are in somewhere like Texas, then so are expectations. You pay the government relatively little, so you expect it to be involved relatively little in your life.
[00:10:27] And when taxes are higher, for example in France, with Arlette, so are expectations.
[00:10:34] As you might know, France takes great pride in providing for its citizens through good and bad.
[00:10:41] There’s generous support for the unemployed, it is very hard to fire someone, and French employees are entitled to very generous pensions, especially in the case of state employees.
[00:10:54] So, Arlette in France, because she pays so much more tax than John in Texas, especially with her great new pay rise, she is likely to be much more engaged, and have much higher expectations for things like healthcare, schooling, and transport.
[00:11:13] And if Arlette feels like she isn’t getting value for money, if the state isn’t delivering for her in the way that she feels it should, then she will probably be more frustrated than John in Texas.
[00:11:28] Again, we can see some examples of this in relatively recent French history.
[00:11:34] You may remember the Gilet Jaunes movement that started at the end of 2018.
[00:11:40] To briefly remind you what happened, around November 2018 there was a popular movement in France of people wearing bright yellow jackets who took to the streets.
[00:11:53] Initially, they were protesting a proposed new type of tax on fuel, but it was a reaction to what was felt to be a disproportionate tax burden on the lower and middle classes, they thought that taxes were too high on lower and middle earners, and not high enough on the richest in society.
[00:12:16] As some further background to this, the French president, Emanuelle Macron, had removed a wealth tax, which was a tax on wealth over €790,000.
[00:12:29] Against these rising prices and the view that French taxpayers weren't getting good enough value from the government, hundreds of thousands of people took to the streets, saying enough is enough.
[00:12:43] Eventually, Macron backed down, and agreed to many of the demands of the Gilets Jaunes.
[00:12:51] So, why is the Gilet Jaunes movement relevant to tax?
[00:12:57] Because it is a great example of the correlation between tax rates and citizen engagement, that the protestors were paying all this money in taxes yet they didn’t think the government was supporting them.
[00:13:12] Then, contrast that with the reaction in Texas, which was basically “you’re on your own, guys”.
[00:13:19] Now, this episode is certainly not meant to be saying that one system is better than the other, or that there is a right way to do taxation.
[00:13:29] Clearly, there are thousands of different views, and in a democracy we all have the ability to have our say by electing political parties that align best with whatever we believe.
[00:13:43] But what is certainly true in almost all countries is that taxation does create a much closer bond, a much closer relationship between the individual and the state.
[00:13:56] On one level, this is obvious - the more you pay for something, the more you are likely to care about its quality.
[00:14:04] But if there is a complete breakdown of this bond, if taxpayers don’t feel like they are getting value for money, then the more tax they pay, the more they are likely to express their dissatisfaction.
[00:14:20] The Gilet Jaunes protests may have been relatively peaceful, but throughout history there have been instances of riots, rebellions, and revolutions all due to people rising up against what they believed were unfair and unjust taxes.
[00:14:39] While, to repeat, there is no ‘right’ answer on tax, I’d like to end this episode with a brief discussion of a type of tax that has become more and more debated in recent years.
[00:14:54] A wealth tax, a tax on your total wealth, a tax on all of the stuff you have.
[00:15:00] Although there have been different versions of it proposed throughout history, it was brought back into discussion after the publication of a book by a French economist called Thomas Piketty, called Capital in the 21st Century.
[00:15:16] You may well have read the book - it has been translated into dozens of languages, and has sold millions of copies.
[00:15:24] In it, one of the main ideas proposed by Piketty is a global wealth tax, a tax on the richest people in the world, which would start at 0.1% and rise to 2% on large fortunes.
[00:15:39] It would be what’s called a progressive tax, so the more you had, the higher the percentage you would pay.
[00:15:47] And he also suggested a much higher top rate of income tax, with the government taking up to 80% of the income of the highest earners.
[00:15:57] I don’t think our friend John in Texas would like that idea very much.
[00:16:02] One of the reasons that Piketty’s book was so successful was that he wasn’t just someone on the street corner saying “we should raise taxes”, he was one of the world’s most respected economists, and his research was based on serious economic study.
[00:16:19] There were, of course, plenty of people who opposed it, saying that he had got it all wrong, and that his ideas would destroy economic growth.
[00:16:29] But it caused a lot of debate, and even by those who disagreed with it, it was taken seriously.
[00:16:36] When he published it, in 2013, it was referred to as ‘right time, right message’.
[00:16:44] Inequality had been increasing in much of the western world, particularly in the United States, and what Piketty was proposing was a solution based on economic theory, not just a political message.
[00:16:59] And since then, similar taxes have been proposed in countries one might have never thought would be open to a wealth tax.
[00:17:08] In the United States, the land of the brave and home of the free, Elizabeth Warren and two other Democratic senators proposed a wealth tax on the ultra wealthy.
[00:17:20] This one really was for the ultra ultra wealthy. it would only start at $50 million, meaning that if your net worth was less than $50 million, which is the case for 99.9% of Americans, you wouldn't have to pay it.
[00:17:36] Yet still, it was met with fierce resistance, labelled as an attack on American liberty, and yet another way for the federal government to get its hands on your hard-earned money.
[00:17:51] What the popularity of such ideas does tell us though is that the idea of tax is evolving, the idea of who should pay tax, and how much they should pay, is still very much up for discussion, both as the gaps between rich and poor grow wider, and as countries are figuring out how to pay the bill for the cost of COVID-19.
[00:18:17] There is of course no right answer, so I’ll leave you with two quotes about taxes, and you can choose which one you feel aligns more with your beliefs.
[00:18:28] We’ll start with the American Judge, Oliver Wendell Holmes Jr., who once said “I like to pay taxes. With them, I buy civilization.”
[00:18:38] Or, from another American, the TV broadcaster Arthur Godfrey, who once said “I am proud to be paying taxes in the United States. The only thing is I could be just as proud for half of the money.”
[00:18:54] OK then, that is it for today's episode on the actually quite interesting world of Tax.
[00:19:02] I hope it's been a thought-provoking one, that you've learnt something new, and whether it’s looking at your payslip at the end of the month, or doing a tax return at the end of the year, you might think about the numbers on there in a slightly different way.
[00:19:17] As always, I would love to know what you thought of this episode.
[00:19:21] What do you think of the tax system in your country?
[00:19:25] Would you rather pay a higher rate of tax and feel like you have a stronger bond with your fellow citizens, or would you rather pay lower taxes and be a master of your own destiny. I would love to know.
[00:19:39] For the members among you, you can head right in to our community forum, which is at community.leonardoenglish.com and get chatting away to other curious minds.
[00:19:50] And if you’re not yet a member of Leonardo English, then perhaps today is the day to do something about that.
[00:19:56] Membership of Leonardo English means unlocking all of our bonus episodes, learning with the transcripts, the subtitles and key vocabulary, and joining a community of curious minds from all over the world. It might just be the smartest learning decision you’ll take all year.
[00:20:14] And the place you can go for all of that is leonardoenglish.com
[00:20:20] You've been listening to English Learning for Curious Minds, by Leonardo English.
[00:20:25] I'm Alastair Budge, you stay safe, and I'll catch you in the next episode.
[END OF EPISODE]
