The Cooking the Books Column from the April 2015 issue of the Socialist Standard
‘Tax the Rich’ is a popular slogan on the populist Left. ‘For progressive tax on rich corporations and individuals and an end to tax avoidance’ is one of the promises in the Trotskyist front organisation TUSC’s election manifesto. Further down the pyramid at constituency level this is simplified to ‘Stop the cuts: tax the super-rich’ and ‘Tax the 1%’. Another Left populist candidate, Nick Long, standing for the Lewisham People Before Profit party, wrote to the Morning Star (4 February):
‘Taxing the super rich and getting tax-dodging corporations to pay their taxes can bring about an end to austerity.’
But would it? Could it . . ?
The rich, especially the super-rich, can certainly afford to pay more tax. Even the arguments put by their apologists don’t deny this. They concentrate on arguing that they shouldn’t be taxed too much, that if they were they’d move abroad or would no longer be prepared to work for capitalist firms in Britain. This would happen to some extent but confirms that capitalism is a world system and that any solution to the problem is not to be found at national level. But the fact remains that the rich are rich enough to pay more tax out of their huge incomes and piles of accumulated wealth.
Would making them pay more tax end austerity? Austerity is the government cutting back on its spending so as to reduce the burden of taxation on profits in a slump as a way to help a profit-led recovery (the only way a recovery can come about). Increasing taxes on ‘rich corporations and individuals’ would allow the government not to have to cut its spending so much, but if more than a one-off would prove to be counter-productive.
The incomes of the rich come in the end, one way or the other, out of profits. Not all of it is spent on conspicuous consumption (in fact that’s against the logic of capital accumulation, which is what capitalism is all about). Most is saved and so comes to be re-invested in production to make further profits, a part of which will provide their future unearned incomes.
So taxing the rich is in the end a tax on profits. This is obvious in the case of taxes on ‘rich corporations’. Corporation tax used to be called ‘profits tax’ and that’s what it still is: a direct tax on profits. As capitalism is a profit-driven system anything that reduces profits or makes profit-making more difficult will bring about an economic downturn. In a slump, as at present, it would delay any recovery.
Since you can’t tax the rich unless the rich continue to exist and continue to draw a taxable unearned income, i.e. unless capitalism continues to exist, TUSC and the other Left populists who chant ‘Tax the Rich’ are proposing the old failed reformist policy that the Labour Party used to espouse of redistributing income from profits to workers, but not even to try to improve workers’ conditions but merely to try to stop them getting worse.
It won’t work. In promoting the idea that it could, they are peddling the same sort of empty and unrealisable promises as the conventional politicians. The fact is that capitalism cannot be reformed to work in the interests of the wage and salary-earning working class and their dependents. The only way out is to replace capitalism – with its division into rich and the rest – altogether.