Taxing problem
Dear Editors,
I’d like to point out what I think is a mistake in the Socialist Party’s thinking on tax – that workers don’t really pay tax because they can’t afford to, and that it’s always a tax on profits. The poll tax fell most heavily on the poorest people and was not passed on to capitalists in paying higher wages – certainly not for unwaged people. The workers pay a lot of tax in VAT on fuel, electrical goods, taxes on cigarettes and alcohol. The council tax is much more of a burden to poorer people too. It got left to anarchists and Leninists to oppose the poll tax and these people are not known for believing in fairness and justice.
Lynn Stewardson,
Nottingham
Reply:
Actually, we don’t deny that workers pay, in the sense of themselves handing over the money, some taxes. Our argument is that the burden of taxation does not fall in the end on the working class but on the propertied class and profits.
This is based on the assumption that in the medium term workers sell their ability to work at its cost of production (or what Marx called its value), i.e. at the cost of what they must buy to keep their skills up to scratch and also to raise a family to take their place on the labour market when they retire. It follows from this that any permanent increase in the workers’ cost of living, whether from taxes or from higher prices will be passed on to employers as higher money wages and salaries (On the other hand, any permanent decrease in their cost of living, as from rent control or from subsidies to food or transport, will end up being a subsidy to employers in the form of lower than otherwise money wages.)
Having said this, most taxes in Britain are not even paid by workers but are collected and paid by businesses. Obviously, this is the case with corporation tax. It is also the case with income tax on wages and salaries, which is deducted by employers from nominal wages under the PAYE system and never even get into the hands of bank accounts of employees (income tax, in fact, is mainly a means of ensuring that workers without families don’t get that part of wages meant for raising a family)
Perhaps less obviously, this also applies to VAT. It too falls on and is collected by businesses. As its name implies it is a tax on “value added” which, in capitalist economics, translates into a business’s wages bill plus its profits. As we have just seen, wages in the medium term represent the cost of production of labour power, so though the amount of VAT payable is calculated on the amount of “value added” in fact just like corporation tax it only comes out of profits. Firms can’t automatically increase their prices by the amount of the tax; they reduce their profits by it.
Excise duties on beer, spirits and tobacco are also paid out of their profits by the firms involved. Only in this case prices are raised. The government in effect creates an artificial monopoly position allowing monopoly prices to be charged – and then taxes away the monopoly profits for its own benefit. lnsofar as these goods, selling at their monopoly prices, enter into the general cost of living of the working class they are reflected in higher wage levels.
The taxes workers actually pay out of their own pockets are such things as car licences, TV licences and, if they are owner occupiers, council tax – but, once again, in so far as these enter into the general cost of living they are reflected in wage levels.
As regards the poll tax, the Thatcher government clearly made a major blunder in imposing a tax which had to be physically paid by every adult. Not only was this not cost-effective in capitalist terms (the extra costs of collecting it) but it led to resentment amongst those who had never paid such taxes and in many cases couldn’t afford to anyway. In the end a combination of non-payment, riots, demonstrations and the loss of votes in by-elections, caused the government to back down and restore something akin to the old system under which only owner-occupiers paid local taxes.
As to the unwaged, since they depend tor their income mainly on handouts from the state, taxing them does not make much sense from a capitalist point of view – its just takting back part of what’s been handed out, so why hand it out in the first place? This is why the government will he introducing so-called “tax credits”, under which what is to be paid as tax (if anything) is to be set against what is to be paid as benefit and only the difference paid. So, as with PAYE, the poor will never see the taxes they “pay”. Forcing the poor to physically pay a tax like the poll tax doesn’t make sense either as the level of income support (formerly supplementary benefit, formerly national assistance, formerly the poor law) is fixed as the minimum supportable level which in theory can’t be reduced further. If you try, you get riots even in small peaceful towns like Wells and Taunton.
Editors.
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