Everyone depends on hospitals, roads, police and schools
but they're expensive
and governments across the world
are feeling the pinch.
So, how can we continue in the future
to afford good quality public services?
Why has pressure on public services increased?
Populations are aging.
As the number of retirees grows,
working people are going to have to pay more taxes
to support them.
And as healthcare technology improves,
the cost of health care is also going to rise.
But where to find the cash?
Basically governments can tax three things,
income, consumption or wealth.
It's not your imagination.
Income taxes really have been increasing
over the past 50 years.
The evidence shows that taxes on income
including corporation tax discourage people from working.
Countries with low income taxes
such as the UK tend to have stronger economic growth.
Second, consumption.
This is things like sales tax in America
or value-added tax on purchases in Europe.
One problem with consumption taxes
is that they hit poor people hardest
who spend more of their income on day-to-day expenses.
Third, we have wealth taxes.
This could be a better idea
than taxing income or consumption.
This is partly because it places a higher levy
on the things that rich people have
such as property, and investments.
Some economists advocate something called a land value tax
and this is basically where you tax
the value of plots of land
and this can raise a lot of money.
A land value tax
has very few unintentional bad consequences.
The problem is that taxing wealth
is not politically easy.
Homeowners, for instance, are gonna be furious
if they're asked to pay higher property taxes
but if people want good government services,
it's gonna need money.
Taxes on wealth are always unpopular
but sooner or later, governments
are going to have to bite the bullet.