Income Tax and the wage struggle (1963)

From the November 1963 issue of the Socialist Standard

It is popularly supposed to be a virtue in a government not to impose income tax on low-wage workers. So each government tries to claim credit for having made alterations in the income tax which have the effect of freeing some workers from tax liability entirely, or at least of reducing the amount of it. This claim was made by the Labour Party following its six years in office after 1945 and was repeated by the Conservatives at the 1959 election.

Both the claims are so framed as to be distinctly disingenuous.

It was quite true, as the Conservatives claimed, that the raising of the tax allowance exempted millions of people from tax, but it was equally easy to see that, as wages rise, the exempted millions came into tax range again. And when the Labour Party Handbook 1951 claimed that a youth earning £3 a week in 1951 was paying less income tax than would have been levied on a wage of £3 in 1938 it would have been appropriate to point out that £3 in 1951 would buy only about half what it would have bought before the war.

And both governments refrained from stressing the fact that since the war income tax (Pay As You Earn) has been brought down to lower pay levels to take in millions more wage and salary earners than before the war. The number of people paying tax was under four million in 1938, 12 million in 1945, over sixteen million at the end of Labour’s term of office, and up to nearly twenty million in 1961-2. The Tory budget of 1963 removed nearly four million from liability but with every wage increase some will be coming into the range again.

So if it is a merit not to make workers pay income tax neither the Labour Party nor the Tories can match up to the performance of the National Government in 1938; and none of them can compare with the governments in the nineteenth century which exempted practically the whole of the industrial workers and clerks from liability. An article in the summer number of Public Administration, by Mrs. Olive Anderson, shows that in the middle of the century the minimum level of pay liable to tax was about £3 a week, while the wages of even the most highly skilled craftsmen were under 30s. a week, and clerks’ wages were under 40s. a week.

Interest attaches to the comparison because during the Crimean War tax reformers campaigned to get the taxable level brought down so that the mass of workers would be brought in, one suggestion being to make the tax payable on all wages of 6s. a week and over. One of the arguments was that as it was the town workers who were so keen on the war, why shouldn’t they help to pay for it through income tax?

The proposed changes were not adopted, chiefly because of the difficulty and cost of collecting small amounts of tax from millions of individuals, many of whom often changed their jobs and moved to different towns. Below a certain level the tax costs more to collect than the yield to the government.

Later on tax collection became more efficient and more and more people were brought into tax liability by the twofold movement of the lowering of the exemption limit (from £160 in 1899 to £130 in 1915) and the upward movement of prices and wages.)

But what is there in the common belief that the working class as a whole gain from a lowering of income tax and would gain still more if they were entirely exempt? The answer is, nothing at all! The condition of the working class, apart from possible short term effects when changes are introduced, is not the result of taxation whether in the form of income tax or the so-called indirect taxes, Purchase Tax, etc.

To start with, were the working class better off in 1938 when most of them were exempt from income tax and the rate was only five shillings (1s. 8d. on the first £135), than they have been since the war when nearly all of them are within the tax range and tax is at a higher rate? The evidence points to the fact that as a class they were rather worse off in 1938. And to go further back, were they better off in 1900 or 1850 when they paid no tax at all? Again, the answer is No!

In the latest year for which figures are available there were about 23 million wage and salary earners (including company directors) whose total income was about £14,000 million and who paid a tax of £1,200 million. If we take the industrial workers and shop assistants only, with a total wage bill of about £9,000 million a year, the amount of tax might perhaps be in the region of £300 million to £400 million a year.

Of course those who now have tax deducted would find their take home pay correspondingly increased when the deduction was reduced or ceased, and would for a while be better off; but in the general struggle between workers and employers over wages, this reduction of tax would be a factor in stiffening the attitude of the employers. In the situation of recent years, with fairly continuous low unemployment and increasing prices, such a reduction of tax would operate like any slackening in the rise of prices, it would make it that much more difficult for wage claims to make headway against the employers’ resistance.

Conversely, changes which have brought more and more workers into the tax range, or have increased their rate of tax. had consequences similar to rises in the cost of living: they have stiffened the pressure of the workers for higher wages especially when unemployment has been low. In other words now that millions of workers have tax deducted they have come to think in terms of “take home pay” and to struggle for the maintenance or increase of that, rather than to look at the wage before deduction.

Mrs. Anderson, whose article has already been referred to, has found that a similar situation may have existed during the Crimean War. One of the reasons why income tax was not then extended to take in wage earners was that with the shortage of labour caused by the war it was feared that to whatever extent tax was levied on the workers the employers would be forced to raise wages to keep take home pay at its former level.

In short, struggling to raise wages is in line with working class interests, campaigning over taxation is not.

Edgar Hardcastle

Sob story (1951)

From the November 1951 issue of the Socialist Standard

Or “Swings and Roundabouts"

In the harbour of Monaco, millionaire Sir Bernard Docker came ashore from his magnificent yacht “Shemara” to talk to Sunday Express representative Bernard Harris (2.9.51) on the subject of rich men's taxes. The millionaire is an irate and indignant man, sobbing into his champagne; the sour milk of human unkindness is curdling his digestive juices. The reason in a nutshell is the Labour Party’s latest manifesto which declares “Further taxation must be levied on the small minority who draw large unearned incomes from private fortunes.” Sir Bernard says, “No one in Britain has got any real income now,” which boils down to the fact that under the present system of taxation no man is left with more than £6,000 per annum, To achieve this amount he must have a gross income of £100,000. To a millionaire this is mere chickenfeed, and you cannot possibly run a large yacht (crew of 32) and afford a town and country house, so what are you to do? The answer is, painful though it may be, you must draw on your capital. Thus the latest threat of further taxation hits where it hurts. “It is ludicrous” (wails Sir Bernard) “to think that you will get happiness and prosperity by forcing everybody down to a dead level of uniformity. Every man in Britain should have the opportunity to make all the money in the world. For in the creation of wealth for themselves men create work and good living standards for others.” His wrath is then directed against “this socialist talk of the rich living on the labour of others.” (For socialists read Labour). “It is complete ballyhoo. What have they ever created? Everything they have touched, including their nationalisation projects, has been a complete flop.” We would hesitate to class nationalisation as “creative ” but would like to put on record that all the vast wealth which Sir Bernard owns (including what was left by his Dad) has been and still is, created by the workers. There are only three ways of getting a living in this sorry world, by working, begging or stealing. We are not suggesting that Sir Bernard goes out and robs a bank when he wants some spending money. The fact is that capital invested in industry derives huge profits in the form of dividends from the unpaid labour of the workers. Capitalists the world over acquired and are acquiring their enormous wealth from the surplus labour put in by the workers over and above their weekly wage. That is where the robbery takes place.

The Sunday Express tells us that the “philosophy of this forthright millionaire is summed up as follows by a big American company:—

“America became great by letting Americans become great, giving every man, woman and child a chance to go as far as his energy, productivity and ambition let him. Destroy opportunity for profit and you destroy ambition; destroy ambition and you destroy America.” 

Sir Bernard maintains that the above portentous pronouncement “goes” for Britain as well as America. He should not lose sight of the fact though that Docker Senior gave him a pretty good start, building up investments in a powerful industrial group of companies in the Midlands. However, to quote his own words, “It is ludicrous to force everybody down to a dead level of uniformity.” Sir Bernard may sigh about the Labour Government “soaking” the rich, but he should bear in mind that among other things there is an outsized rearmament bill to be paid, not to mention Korea and Malaya, and as all wars are waged on behalf of the class he represents he must expect to pay the piper when the system he supports calls the tune.

We cannot close, however, without giving him one crumb of comfort.

Perchance when the rearmament programme gets cracking Sir Bernard will gain on the “roundabouts” of the Birmingham Small Arms Company a little of what he loses on the “swings” of taxation. Here's hoping, anyway. It's putrid being down to your last yacht.

F. M. Robins

The Bogey of the Taxes. (1950)

From the November 1950 issue of the Socialist Standard

In the first issue* of the Socialist Standard (September, 1904) an article was published under the above title. It explained a view on taxes and rates that has been consistently held by the S.P.G.B. It showed that taxation is not a question with which the working class should concern themselves. Owing to the greater degree to which prices are now government-controlled, and owing to the general rise in the amount of taxation, it may seem on a superficial view that it is absurd in these days to say that rates and taxes are not a burden on the working class; but the S.P.G.B. view, though it shocked the reformist parties nearly half a century ago, is still the only sound one.

The Appearance of Things

At first glance it seems so obvious to workers that they suffer from high taxation and would benefit if it were to be reduced, that they do not believe that there can seriously be a contrary view. They see that they pay a high price for cigarettes because of the succeeding increases of the duty levied on them; that they pay more for articles on which there is purchase tax; and that some of them pay income tax.

What is more they know how large the amount of tax or duty is on some articles. Cigarettes in 1914 were sold at 4d. or 5d. for a packet of 20. In 1939 the price had gone up to 1/2 and is now 3/6, of which duty accounts for 2/9½, and as the cost of tobacco imported from America has increased as a result of the devaluation of the pound in September, 1949, the price may rise still more—though it should be noticed here that that will not be due to an increase of tobacco duty but to an increase of import prices.

As regards income tax, official figures show that in 1947-48 the total wages of 20 million workers amounted to £5,907 millions, and £455,400,000 of this was deducted as Income Tax (91st Report of Inland Revenue. Page 33). This means that on an average about 1/6 out of every 20/- of wages and salaries is deducted as Income Tax. Many workers pay no income tax; either because their wages are below the limit where income tax begins, or because they are exempt from tax through the reliefs allowed for wife and children. An unmarried worker earning £6 a week pays about 11/- a week tax. On the same pay a married man without children pays about 4/6d. a week, and if he has one child he pays about 6d. a week. With two children he pays no tax and he also receives 5/- a week as State allowance for the second child.

With these facts in mind it seems to be undeniable to most workers that if income tax and purchase tax and the duties on beer and cigarettes were to be reduced they would be better off.

But again we say that that is only the appearance of things. The reason for this will be explained later, but before coming to the explanation there are some further factors to be examined.

Some Additions and Subtractions

Any member of the Labour Government, asked about taxation, will reply by pointing to what he will call the other side of the picture. He will show that the government spends over £400 million a year of the money raised by taxation in subsidising various foodstuffs so that they can be sold at prices lower than if there were no subsidies. The Government also spends about £60 million a year on childrens’ allowances, and contributes £450 million to the health service, old age pensions, insurance benefits, etc., including £47 millions on public assistance. The defender of the Labour Government will argue that this is all of benefit to the workers.

The Labour Party has no comprehensive theory to explain what determines the amount of wages the workers receive though at present the view propagated by the Labour leaders is that higher wages can only come through harder work and increased production. Their argument about subsidies and taxes goes on the following lines. They say that if we assume wages to remain at about the present level then subsidies are good because they permit the workers to get more for the money they spend; and if income tax were to be reduced the workers would also have more of their wages to take home and could spend more. We do not accept the Labour Party view about wages but let us assume merely for the sake of argument that their view is correct. As soon as we do so we notice that there is a snag in it even from their standpoint.

If we are asked to believe that the workers are better off because the government spends £400 millions a year on subsidies to keep food prices down then we must set against it the fact that the government is now collecting through the increase of duties on beef £200 million a year more than was raised in that way before the war; while the increased duties on tobacco and cigarettes produce for the government £520 millions a year more than before the war. A large part of this is collected on the beer and cigarettes bought by the workers.

If the workers receive as childrens’ allowances £60 million a year and the government contributes £450 million to the social services there has to be set against this the £455 million income tax deducted from wages and salaries. (The workers also pay national insurance contributions, but taking one year with another these are returned as benefits).

On the face of it we see that the payments to the workers and the deductions from wages as income tax, and the duties paid on beer and cigarettes, etc., more or less cancel each other out.

It might be thought from this that the government is going to a lot of trouble just for no purpose at all but there is more in it than meets the eye.

The deductions in the form of income tax and the duties on beer and tobacco mainly hit the unmarried workers who pay more income tax than do married men and are likely to be able to afford more beer and cigarettes. On the other hand it is only the married men with families who are affected by childrens’ allowances and it is they who are mostly affected by the food subsidies. What, therefore, the whole so-called “Welfare State ” achieves is a certain redistribution of wages among the workers themselves. Or to put it another way the discontent of the married men that would otherwise add weight to the demand for higher wages is to some extent lessened, thus making it easier for the government and the employers to gain acceptance for the policy of no wage increases.

We now come to the general question of wages and prices and to the socialist contention that taxation is not a working class question.

Wages and the Cost of living

The Marxist explanation of wages is that they are the price the workers receive for something they sell, that something being their power to labour, their physical and mental energies. It is sold by the hour, day, week or month and like other commodities sold under capitalism its value is determined by the amount of labour required to produce it; which means the cost of the food, clothing, shelter, etc., required to maintain the workers and their families.

Wage levels differ from one occupation to another largely because the cost of acquiring different kinds of knowledge training and skill differs. Wage levels are not necessarily at some bare physical minimum of subsistence. This is because custom plays a part. If, over a period of time, backed by trade union struggle, the workers become accustomed to additions to their standard of living (e.g. when workers become accustomed to spending on beer, cigarettes, cinemas; wireless sets and so on) they will make great efforts to resist being reduced again to a lower standard.

At times when unemployment is widespread the ability of the workers to struggle for higher wages or to resist a reduction of wages is much. lessened. At times when unemployment is small the ability of the workers to enforce wage demands is greater but, as recent experience has shown, government propaganda against wage increases has some effect in dissuading workers from using the opportunity.

Wages and the wage struggle are much influenced by changes of the prices of the articles that enter into the workers' cost of living. If the cost of living rises the workers must struggle for a corresponding rise of wages or else suffer a lowering of their standard of living.

Owing to this struggle, although wages and prices do not necessarily keep in line, experience shows that they do not usually get much out of line. The Labour Government supporters who say that workers are much better off because wages are higher than before the war, and the Tories who say the workers are much worse off because prices before the war were much lower, are both wrong. An estimate made by the Oxford Institute of Statistics (“Bulletin” July-August, 1950. Pages 244 and 245) showed that in the 10 years to May, 1949. wage rates had risen since before the war by 80 per cent. and working class cost of living by 79 per cent. Although it would not be claimed that precise estimates are possible it may be taken that these figures are at least approximately correct. During the past three years wages have risen less than the cost of living. The Ministry of Labour figures show wages as having risen since June, 1947, by 10 per cent. and the cost of living by 13 per cent.

Taxation and the Workers

Now we may ask what part taxes play in this struggle. First let us view it from the standpoint of wages. The short answer is that workers think in terms of the money they actually take home and can spend. Workers who resent having considerable amounts deducted as income tax are to that extent spurred on to demand higher wages as compensation, and under conditions that are favourable (e.g., comparatively little unemployment) past experience shows that a struggle on those lines may be more or less successful. An estimate covering the period 1939 to October, 1947 ("British Labour under Labour Government." published by the United States Department of Labour) showed that wage rates had increased just about enough to compensate for the increased cost of living, after allowing for the deduction of income tax from wages.

If we now look at the problem from the standpoint of prices we see that if prices rise because of purchase tax or duties on beer, cigarettes, etc., that is just like any other factor causing a rise of prices. The chief reason why the cost of living is about three times what it was 50 years ago is not because of purchase tax or duties. It is because the pound has been fixed at a relationship to gold which is about one-third what it was in 1900. The latest change in that direction was the devaluation of the pound in September, 1949. It has already had considerable effect in raising wholesale prices and we can expect that before long it will increase retail prices in the shops unless the Government decides to increase the amount of subsidies paid and thus manages to keep prices down.

By comparison with the enormous devaluation of the pound since 1900 the effect of purchase tax and the duties on beer and cigarettes are minor factors in causing the cost of living as a whole to rise.

But whatever may be the cause of a rise of the workers' cost of living they must struggle to secure at least compensating wage increases if they are to save themselves from becoming worse off.

We may now put the question would a reduction of taxes make the working class better off ? The answer is that the working class always have to struggle if they want to improve or even to maintain their standard of living.

If a reduction of purchase tax and duties was followed by a fall of the cost of living workers would be faced with intensified efforts from the employers to force down wages. The cost of living did fall heavily in the early nineteen-twenties and workers in most industries suffered wage reductions as great or nearly as great as the fall of the cost of living. A comparison with the years 1900—1914 really answers the question. At that time prices and taxes were very much lower than now but nobody seriously claims that the working class were better off because of that. Prices were lower and so were wages.

Rents and Rates

Just as some people isolate income tax or purchase tax or the beer and tobacco duties and argue that if only these were reduced the workers would be better off, so others isolate rent and rates and argue that if only these items were reduced it would raise the workers standard of living. As has already been pointed out all of the workers’ items of expenditure are part of his cost of living and no matter whether one item or all items are reduced in price the workers still have to struggle to prevent wages from falling with the fall of the cost of living. Two examples will illustrate the truth of this.

Rent restriction was introduced because, owing to the shortage of houses during the first world war, landlords were able to demand greatly increased rents. Rents were therefore controlled because otherwise there would have been what a government committee of inquiry called “grave unrest,” meaning that the workers would have come out on strike for higher wages. It will be noticed here that the rents did not go up mainly because of any increase of rates but simply because the demand for houses exceeded the supply. The advocates of rent control argued that control of rents improves the position of the workers because with low rents they have more money to spend on other things. Rent control has continued and the average proportion of wages spent on rent has fallen. Are the workers better off? Do they as a result of rent control feel that they have more money to spend on other things and need no longer worry about the cost of living? On the contrary the cost of living issue in relation to wages is as acute now as it always was. When the gas maintenance men came out on strike in September one of their representatives declared:—“Strikes are about to break out all over the country—quite rightly—because of the cost of living.” (Daily Mail, 4/10/50). The feelings of the gas workers on the cost of living are shared by workers generally.

Authenticated and more precise examples were reported on by the International Labour Office in a report published in 1925. (“The Workers Standard of Life in Countries with Depreciated Currencies.”) The report showed that in Vienna the proportion of wages spent on rent had been reduced through rent control from 20 per cent, in 1914 to barely 1 per cent, in 1923. But were they better off? The conclusion of the I.L.O. was as follows:—“Most of the workers were in the same position as in Germany; they had practically no liabilities under the heading of rent, but the corresponding amount was not included in their wages. The actual gain was thus nil.”

The people who gained were the employers (through wages being kept low) and the people who lost were the landlords. The Report continues: —“ Industry on the other hand, benefited, as in Germany, by the reduction in the cost of most labour by the full amount which rent represented in wages before the war.”

Taxes and Prices

The case has been argued on the assumption that purchase tax and duties may cause a corresponding increase of prices. Under post-war conditions, with government controls and price fixing and shortages of supply of many articles, this has usually happened. Under pre-war conditions when supplies were plentiful and competition between sellers was keen it sometimes did not happen. Sometimes when duties were increased the sellers, in their anxiety to capture a larger share of a restricted demand, either did not increase their prices or increased them by less than the increase of duties. Even now, as supplies of some articles have increased and stocks have piled up, sellers of some articles have sold at less than the maximum controlled price either as a continuous policy or periodically through sales at cut prices.

But again it is emphasised that whichever way it goes the workers are forced to struggle to keep wages in line with the cost of living and cannot hope automatically to improve their standard of living by any device for reducing prices, rates, taxes or duties.

On Whom do Taxes Fall?

The S.P.G.B. holds then that the question of high or low prices or taxes is not a working class question because what the working class live by is wages and they have to struggle to maintain wage levels whether prices and taxes are high or low and the principal factors in the struggle are, on the one side, the workers' cost of living, and on the other side the factors such as good or bad trade, much or little unemployment which help or hinder the trade unions in pressing wage claims.

If then taxation (and this includes rates as well) is not a working class problem whose problem is it? Taxation is the problem of the capitalist class. All of the wealth that the workers produce is the property of the employing class. When the employers have succeeded in selling the goods produced by the workers they employ, and after they have paid wages and met all other expenses of production, they still have to meet the demands of the local and central government for rates and taxes of various kinds. All of the employing class have an interest—as they continually show—in trying to reduce the cost of government. As far as is politically practicable and militarily safe they try to reduce the amount the government raises as taxation and spends on civil service, military service, prisons, police, etc., etc. If they succeed in getting taxation reduced it is in the hope of benefiting themselves; certainly not with the intention of passing on the benefit to the workers.

But beyond this the capitalists are much concerned with trying to place some of the burden of taxation on the shoulders of other sections of their own class. When the brewing interests try to get beer duties reduced (because they hope thereby to increase sales and profits) they do not at all mind if the government meets the situation by putting a corresponding increase of taxation on the capitalists in some other industry— the cinemas for example. But however the struggle between sections of the capitalists over taxation may turn out that is their problem and it involves no interest affecting the working class.

It is emphasised that the whole of the problem discussed here is viewed from the standpoint of the working class as a whole. It is not questioned that changes in taxation and price levels, etc., may affect individuals or groups in different ways. When prices fall some strongly placed groups of workers may, at least for a time, succeed in holding on to their former wage rates; and when prices rise some groups may be quite unable to secure corresponding wage increases. But these cases do not affect the general argument as it relates to the position of the working class under capitalism.

Conclusion

The purpose of this article Is to show that under capitalism the working class have got to persist in their endless struggle to maintain and improve their standard of living. There are no ways of escape inside capitalism from the position the working class occupy as an exploited class. Does this mean that there is no way out at all? By no means. There is a way out and the only way. As a wage-earning class under capitalism there is no future for the working class except a repetition of the struggles they have carried on throughout capitalism. The only way out is for the working class to cease to be a wage-earning class. They must abolish the wages system, abolish capitalism and establish Socialism.

Edgar Hardcastle

Blogger's Note:

Despite it not being November, this article got a bump 'cos it's mentioned in the Editorial Committee's reply to this letter which appeared in the October 1955 issue of the Socialist Standard.

One point of correction, though. Jack Fitzgerald' article, 'The Bogey of the Taxes', which Edgar Hardcastle mentions in the opening paragraph of this article, actually appeared in the second issue of the Socialist Standard, not the first issue.

Answers to correspondents: Taxation and the Workers (1955)

Letter to the Editors from the October 1955 issue of the Socialist Standard

The reason why Socialists hold that taxation is not a burden on the workers were explained in the Socialist Standard, November 1950, to which C. J. Byrne and others are referred.—Ed. Comm.

Letter: Paying for the NHS (1976)

Letter to the Editors from the October 1976 issue of the Socialist Standard

Paying for the NHS

I had understood that the SPGB argued that taxes are ultimately paid by the capitalist class out of surplus-value and that net wages received by workers represent the value of their labour-power (assuming that commodities exchange at their value). However in the August Socialist Standard we are told (Leigh Burr-Parti) that with the coming of the National Health Service workers should expect that in the long run their wages would adjust by being lower than if there were no NHS. This implies that the NHS (and the rest of the welfare state) is “financed” by the workers out of wages, i.e. that it is paid for out of variable capital not out of surplus-value.

Of course all value is produced by the working class and in this sense the working class “pays” for the welfare state. But this is not just a theoretical issue. If the welfare state is financed out of surplus value then presumably it is in workers’ interests to increase welfare provisions, as this would represent a clear increase in their material wellbeing, i.e. in addition to receiving the value of their labour-power they would also manage to get back some of the surplus-value appropriated by the capitalist class. However, if as Leigh Burr-Parti suggests it is financed out of variable capital the working class as a whole is no better off whether health, education etc. is provided by the state or through the market.

This of course is not to deny that whichever way one looks at it the real issue facing workers is the establishment of Socialism where there will be no exploitation of one class by another, and not that of trying to patch up capitalism via the welfare state.

(Ms.) V. M. Brown

London NW6

Reply:

As you say, taxation is a burden on the capitalist class not the working class; and wages are what is received, not a hypothetical gross payment. Though the amounts put down as insurance contributions are not received by workers these amounts are, over-all, returned to them as benefits. Their nature therefore is a portion of wages held back as a special fund. If this regulated reduction were not made, workers’ subsistence would have to include their purchase of medical services and the other needs covered by benefits.

But see how this would work out. Three workers A, B and C receive a total of £6 a week in benefits over a period. A and B are both married; A has children, B has none; and C is unmarried. Obviously A’s are the biggest needs. Conjecturally his share of the £6 may be £4, B’s share £1.50, and C’s 50p. If these needs had to be met by additions to wages instead of a planned deduction, the strength of the wage demand would be A’s requirements: that is, another £4 a week for all three. Instead, all three are dealt with at £2 each week. It may appear that A gains, at least, but of course each is in the others’ position at other times. However, at any given time only a minority of workers are in the full “breadwinner” position on which wages are based, and the contributions scheme is therefore greatly advantageous to the capitalist class.

We may add that this is not an interpretation of our own but was part of the argument of the Beveridge national insurance scheme when it was put forward in 1942. The same can be said of welfare benefits as a whole—income supplements, family allowances, rent rebates etc.: that they select recipients and avoid giving more wages to workers generally. A statement about the effectiveness of the scheme was made by the former Labour minister R. H. S. Crossman in the Daily Mirror on 15th November 1955:

The fact is that since 1945 the British trade unionists could have enjoyed a far higher wage packet . . . Instead of doing so, however, they exercised extreme wage restraint. This they justified by pointing out to the worker the benefits he enjoyed under the Welfare State—food prices kept artificially low by food subsidies; rents kept artificially low by housing subsidies; rent restriction, and. in addition, the Health Service.

You suggest that workers could increase their share of the social product by demanding and getting more benefits. If these come from the insurance fund, the result would only be an increase in “contributions”. If they were medical and educational services provided out of general taxation, it would mean an increase in government expenditure which has other consequences; and the demand would then commit workers who made it to supporting the party which promised the biggest slice of cake—a familiar position.

Editors.

Correspondence: [The wrong Rhind.] (1909)

Letter to the Editors from the October 1909 issue of the Socialist Standard

To the Editor.

Returning from my holidays a few days since, my attention was drawn to a letter which appeared in the Socialist Standard of July over my signature (there being only one Jno. Rhind of Old Trafford). Now I wish to entirely repudiate it and to state that this is the first communication you have ever received from me or by my authority.

To my mind it is a very mean trick, and unworthy of any man, more especially if he professes to be a Socialist.

I may further state that I consider life too short to waste my time over such side-tracking questions as who pays the rates.

Trusting you will give this repudiation the same publicity as you gave the letter referred to,

Jno. Rhind

Reply:

[We regret, of course, that Mr. Rhind should have been—as it appears—”tricked” ; but from information to hand we gather that he has not been misrepresented. The “side-tracking” is all with the Tories, Liberals, Labourites and pseudo-Socialists of no matter what stripe, who seek to interest and keep busy the workers with the amount of the rates rather than with Socialism.—Ed. “S.S.”]

Cooking the Books: Prisoners of the market (2026)

The Cooking the Books column from the October 2026 issue of the Socialist Standard

‘Mounting costs are damaging business investment and undermine the government’s attempts to raise living standards, the CBI has warned’, wrote the Times (9 September), reporting on a document prepared by the employers’ association for the Budget. The CBI’s chief executive, Rain Newton-Smith, argued that:

‘When firms are forced to absorb higher taxes, energy bills, and regulatory costs, the consequences are weaker investment, job losses and less scope to raise wages’.

Employers are always complaining of increased costs due to taxes and stricter regulation, but there is more than a grain of truth in their argument.

‘Absorb’ is a delicate way of saying that, as they can’t pass on the extra costs by raising their prices, their profits have to take a hit. So what Newton-Smith is really saying is: ‘when firms make lower profits due to higher taxes …’ Reduced profits could indeed lead to ‘weaker investment’ (but they could also mean lower dividends for shareholders). Insofar as they do, that does weaken investment. So there is less economic growth. Which, as Newton-Smith pointed out, would undermine the government’s strategy of relying on growth to bring it a bigger tax revenue and so allow it to improve people’s living standard by spending more on education, health, housing and the like.

Irrespective of whether on this occasion the employers are bluffing in order to extract concessions from the government, there is the question of the wider relationship between government and private employers.  The American political scientist, Charles Lindblom, wrote an article in 1982 called ‘The Market as Prison’ in which he argued that, in an economy in which production was in the hands of profit-seeking private enterprises, government decisions were tied to the success of these enterprises. Not only that. If the government didn’t respect this — if it didn’t allow enterprises to make the profits they expected — it would be automatically ‘punished’ by the operation of the market.

His argument went like this: If a government raises taxes too much or imposes too many regulations, companies cut back on investment. This leads to job losses and financial crises. Voters blame the government for this, not the business owners. The government loses the next election. The politicians responsible are punished.

As Lindblom remarked in an earlier book:

‘To understand the peculiar character of politics in market-oriented systems requires, however, no conspiracy theory of politics, no theory of common social origins uniting government and business officials, no crude allegation of a power elite established by clandestine forces. Business simply needs inducements, hence a privileged position in government and politics, if it is to do its job’ (Politics and Markets, p.175).

The market works, he suggested, like an invisible prison in that it limits how far governments can go with social reforms that threaten profits that are business’s ‘inducement’. Anything radical is ruled out. It makes politicians afraid to challenge the ‘privileged position’ of the private sector. They tone down their proposals so as not to scare the market.

A recent example is Burnham’s choice not to appoint Miliband as Chancellor because business perceived him as somehow anti-business. Other examples are Starmer and Reeves’s pre-election statements about Labour being ‘the party of business’ and Burnham’s that his ‘socialism’ is of the ‘business-friendly’ variety.

Politicians in office must help business in its pursuit of profits and certainly not do anything to hamper it. They must serve the interest of business owners.

50 Years Ago: Land Tax (1962)

The 50 Years Ago column from the September 1962 issue of the Socialist Standard

At a time when the toilers are engaged in a bitter struggle with the employers, the Liberals are busy diverting attention to the “wicked landlords” and their “unearned increment.” The dockers being “done down” by a Devonport, are told to tax land values. The miners, vainly seeking 5s. a day, are urged to support the Single Tax idea. The railway men, cursing Conciliation, are advised to levy the ducal landlords.

The Land Tax campaign serves the Liberal manufacturers well. Labour unrest is exploited to turn the minds of the workers away from the real question to the old bogey of taxing land. The policy of smothering men’s bitter feelings against the Devonports, Thomas’s, and Hugh Bells, has, however, a more palpable and material driving force behind it. Hence we note from the Liberal Press that a wealthy and influential committee has been formed to boom the Land Tax campaign.

Mr. Joseph Fels, the well-known soap manufacturer, has contributed £30,000, and many others have given largely. Mr. Josiah Wedgwood, the Liberal pottery manufacturer, is one of the leading spirits in the movement.

Hirelings are sent about the country at great expense, preaching the virtues of the Single Tax.

But why this enormous expenditure? Why this outcry about taxation? Once the worker grasps the true facts of the question of taxation, the campaign and its real meaning become plain. The upkeep of this system of society calls for hundreds of millions a year to support the services that must be run to ensure the safety of our masters.

The cost of the Army. Navy, Police, and bureaucracy is ever rising, and the manufacturers and business men—chiefly organised in the Liberal party—are crying out about their heavy burden of taxation. Wishing to divide the cost of those forces and institutions necessary to keep the workers down, they propose to tax land or land values. The landowners, on the other hand, have no desire to be taxed further, hence their bitter wail.

This time honoured squabble as to who should pay is but one between robbers over the cost of the robbery.

[From the article, 'The Lying Land Campaign: The Socialist View' by Adolph Kohn, the Socialist Standard, September 1912.]

Tobacco smoking: the end of the road? (1962)

From the August 1962 issue of the Socialist Standard

Tobacco has been known to us for quite a long time, cigarettes not nearly so long, but long enough for the smoking habit to be very well established by the time the Royal College of Physicians issued their report on lung cancer earlier this year. Although it is probably true to say that medicos have never been really happy about the effect of smoking on health, it is only in recent years that they have felt able to pin some of the blame on it at least for stomach irritation, chronic bronchitis, heart attacks, coronary thrombosis, and last but not least—lung cancer.

The Royal College’s report Smoking and Health, published last March launches a swinging attack on the smoking habit—cigarettes mainly—but it is not the first of its kind. In 1950, Professor Hill and Dr. Doll published results of their first investigation into the incidence of lung cancer in relation to men’s smoking habits. Then at the beginning of 1952 the American Cancer Society began a survey of nearly two hundred thousand men between the ages of fifty and seventy. Its grim findings were announced to the American Medical Association convention in 1954.

Tobacco shares fell at the news, but Alistair Cooke, writing in The Manchester Guardian at the time, was a little hasty when he assumed that it would “. . . induce profound melancholia or even penury in the American cigarette manufacturers.” Sales of tobacco have continued to rise since then, with cigarettes reaching an all time high in 1961. In that year also, there were 22,000 deaths from lung cancer in Great Britain alone.

In the twelve years since the Hill and Doll report there have been similar independent surveys conducted in at least eight countries. All have reached the same broad conclusions, so that the R.C.P. report this year only set the seal really on the impressive weight of evidence which has been building up in the meantime. It is difficult to say at this stage how seriously this latest report will be taken; there is still a very strong social habit to be taken into account. But that is not the whole story. It is really only the fag end.

The tobacco firms are rich and very well established. Some idea can be gained of the persistent money spinner that tobacco is, when it is realised that in this country alone last year £825 million went to the Government in revenue from this source. Almost exactly the cost of the National Health Service, as one noble Lord put it. Which gives us a glimpse of the dilemma facing our rulers—powerful tobacco interests and a huge tax income on the one hand and a rising lung cancer rate on the other.

Maybe they can take some solace from the fact that others before them have had to tread a similar path. Over the centuries since its discovery and the beginning of its use in England, tobacco has been violently attacked and just as stoutly defended, but its consumption has increased and with it the tax yield. Even James I, who campaigned vigorously against the weed in such works as A Counterblast to Tobacco (1604) was not slow to slap on an import duty of 6s. 8d. a pound the following year. Some say that James’ antagonism toward tobacco was really an expression of his hatred of Sir Walter Raleigh. Be that as it may, and whatever his original motives for imposing the tax, he was cute enough to realise its possibilities. By 1613, he had rescinded his earlier tax and in 1624 made tobacco a Royal Monopoly.

Nicotiana Tabacum — common tobacco — native of Central and South America, is now grown the world over and accounts for about three-quarters of all that is smoked. It was introduced into Europe about 1530. There is still some dispute over which of the colonists in the time of Hawkins and Drake brought the plant to England. What we can say is that smoking slowly took hold here between 1565 and 1590. Ironic that today it should come under such heavy medical fire, when in those days it was thought to have great curative powers and in many places took root because of this belief.

The first cigarettes known to be manufactured in England were by Robert Gloag in 1856. He opened a factory in Walworth, London. This form of smoking gained rapid popularity (probably because of its comparative cheapness) and the various cigarette firms, familiar to us all, were well established by the turn of the century. Seventeen of them combined in 1902 to form The Imperial Tobacco Company Ltd., as a counter to the threat of American competition. They were strong enough to win the “tobacco war” with the American manufacturer James Buchanan Duke, and secured his withdrawal from the English market.

As the market for tobacco, and particularly cigarettes, expanded, so did the government’s interest in it as a course of taxation. This applied even more in times of war. During the first world war, for example, the duty was raised enormously and eventually reached 8s. 2d. a lb., where it remained until 1927 when there was another jump to 8s. 10d. Again, the second world war gave a tremendous fillip to taxation and at the end of it, the duty had reached 35s. 6d. per Ib. Successive governments have continued the practice since then.

Which is just about where we came in. All governments have to levy taxes to finance their administration of capitalism’s economy, and they are not particularly worried about where they get them from. Tobacco has been a sure source of income up to now and cigarettes take the brunt of this because they form at least 4/5ths of the tobacco consumed in Britain today. So although strong medical suspicions have been voiced for over ten years, cigarette consumption has continued to rise and the government has continued to cream off some of the profits.

It must be a bit perplexing for our politicians to have to set about discouraging a widespread habit which they have themselves helped to foster in the past. Remember the huge quantities of “fags” distributed free to the forces during the last war, and how they were considered vital in boosting morale? But 22,000 deaths in one year and the rate still rising cannot be ignored. Let the tobacco companies gripe if they like. The more astute capitalist politician will have his eye on the threat to production if the incidence continues to rise. And remember that it is not uncommon in the younger age groups now, the ones who matter so much in the productive scheme of things. That is why the anti-smoking propaganda has been directed so conspicuously at school children, and not old age pensioners.

Just how successful the government’s campaign will be is anybody’s guess. The smoking habit is certainly well established, but if it threatens the overall interests of the capitalist class they will try to do something about it. What will happen to the tobacco firms then? Some may go broke, but there will be other fields of profitable investment. Labour will be transferred elsewhere, and the government will start looking in other directions for its taxes.

But by then we shall probably have other problems to worry us anyway. Poor health, after all, is not something for which smoking is solely to blame. Inferior diet, poor working conditions and the sheer strain of modern living are constantly wearing workers down. Add only three of the factors which are to that the fact that medical research itself is never very high on the priority list of expenditure, and you have an idea of the magnitude of this problem. To say that it is social is to stress the obvious, and despite the best intentions of the medical profession the task of tackling it can hardly begin until capitalism is well on the way out.

Eddie Critchfield

Politics: Rates, Taxes & the Working Class (1975)

From the March 1975 issue of the Socialist Standard

The swindler Horatio Bottomley, when he was a Liberal MP in 1907, proposed in Parliament measures to finance Old Age Pensions for all people over sixty-five. The chief proposals were an Employer’s Tax of a penny in the pound on all wages; super-tax on investments; Stamp Duty on share certificates; a tax on racing and betting stakes; and State appropriation of all dormant bank balances and securities.

His biographer Alan Hayman says: “It is a tribute to the acumen of Horatio Bottomley that nearly every one of his suggestions has subsequently passed on to the statute book in some form or another.” The acumen obviously came from the frauds Bottomley had already been involved in: having done down a number of wealthy individuals, he knew that if revenue on a big scale was wanted it could only be had from the capitalist class on the assumption that it was in their ultimate interests to pay.

It is a pity that more people have not understood the position so realistically. The idea that taxes are paid by the working class to upkeep institutions which belong to them is one of the myths by which the majority are misdirected towards non-issues. Of course phraseology plays a major part; the revenue from rates and taxes is always described as “public money” and “the taxpayers’ money”. As with terms like “the nation” and “the British people”, it is necessary to ask what is meant by “public” and who are the taxpayers. The case which the Socialist Party of Great Britain has put forward consistently since 1904 is that rates and taxes are a burden not on the working class but on the capitalist class; and this remains just as true in 1975.

Working Out Wages

Many workers would at first glance treat this as preposterous. They are possibly “having to pay” several pounds a week in income-tax deducted from their wages; the prices of petrol and cigarettes are high, and other prices are pushed up, by tax additions. At the present time local rates are expected to go up by fifty per cent. or even more. These are seen as inroads on the money people have to live on, and there has been talk of organized refusal to pay rates if the increases are as great as expected.

The first and most important question is: what are wages? The capitalist system is based on the ownership of the means of production and distribution by a minority, who therefore live by owning. The great majority, having no such resource, have to live by selling their labour-power — that is, working for wages. Thus, labour-power is a commodity like anything else, and its price like all prices is the expression in money of its value — what went into producing it and is needed for reproducing it. At the lowest level that can mean enough money for the food and the rent, but in practice it means meeting many requirements. If the unskilled worker’s labour-power is a cheap product sold at a low price, the professional worker’s salary (equals wage) takes account of his training and the components of his “standard of living”.

But whatever their amount, wages are obviously what is received: the actual payment, not a hypothetical one. Workers cannot help but be aware of this. No-one will be persuaded that £30 is £40 and that the latter figure is a “true” wage; the opposite is the case. The illusion created over “tax deductions” is that if only they could be evaded or reduced in some way, the worker would be so much better off. The single man with a big gap between gross and net pay sees that his colleague with a family has a smaller gap, i.e. takes home more wages, though he probably has less to spend in the end. If only some benevolent tax legislation would provide the best of both worlds!

Paring and Portions

It should be recalled that large numbers of workers were not involved with income-tax at all before the last war; like keeping a bank account, it was regarded as a sign of being well-off. In Studies in an Inflationary Economy (1966) F. W. Paish gives tables showing the percentages of total earned-income tax drawn from different income groups before and after the war. In 1938, 87 per cent. came from the first (the highest) 500,000, and all the tax was attributed to the first 5 millions or less than half of all employed persons. By 1959 the first 500,000 were responsible for only 42.3 per cent. The first 5 millions provided 72.3 per cent., and the range covered the first twenty millions.

This is part of an argument by Paish that there had been a marked equalization of incomes. In fact, the changes in the figures for earned incomes at the top and tax drawn from them reflect changes in the taxation system more than anything else. But, if one granted that the working class as a whole had become concerned in direct taxation since 1938, these figures show what a small concern it is. In 1938 more than half of earned incomes paid no tax; in 1959, with the number of employed persons doubled, roughly three- quarters paid only just over one-quarter of the tax.

What tax deductions achieve is an apportionment of income among the working class. Their introduction early in the war (linked with the post-war credits scheme, a fraud which Bottomley would have envied) had the object, besides raising money, of restricting consumption: they were reductions in wages. The workers most hit by them were, of course, the unmarried ones whose spending money was cut. This remains the case, and it means that the discontent of married workers with homes and families, which is the main strength of wage demands, is checked to some extent.

Incidentally, a report in The Observer of 16th February bears out that tax deductions are cuts in wages. Wedgwood Benn, the Secretary of State for Industry, addressed a Labour meeting at Hillingdon:

Although ostensibly attacking the Tories, Mr. Benn was evidently warning the Chancellor [Denis Healey] that he would not accept any brake on consumption. He denounced as a ‘pre-war remedy’ the idea of a wage cut.

Under Mr. Healey’s plans for bringing down inflation, the level of take-home pay after tax would have to rise less fast than prices.

Paying for What ?

Realistically, therefore, income-tax as far as the working class is concerned is a more sophisticated version of Bottomley’s proposed Employer’s Tax on wages. Not much thought is needed to see that it is paid by employers in any case. It is applied to individual wage-packets to effect varying payments according to status — single, married with no children, married with several to support, etc. — from a notional common wage. (We are not here considering national insurance contributions, which generally are returned to the workers as benefits.)

One argument is that workers do pay taxes but receive benefits in return; thus, that food and housing subsidies and public services are, as it were, purchases on an equalled-out, socially “just” basis. Certainly it is true that subsidies and services are provided by the Government out of taxation, but the beneficiaries over the costs are the capitalist class. Subsidies are an important means of keeping down the cost of living, and but for them the wages bill would be much higher.

Moreover, they are a means again of apportioning. Those chiefly affected by them are workers with families. Why should capitalists have to pay workers ail round to meet a cost, when those to whom it applies can be selected ? This is the purpose of housing subsidies, rent rebates, family allowance and so on, as well as subsidies on food.

What should always be borne in mind, nevertheless, is that the main burden of taxation is for government expenditure on the civil service, armaments, law enforcement and the rest of the general maintenance of capitalism. This is what the capitalist class must support. That is not to say they pay tax willingly. On the contrary, they try continually to have the costs of government reduced — usually by one section seeking to have part of the burden transferred to another section. The differences between the main political parties are largely differences over taxation and expenditure: hew the money shall be collected and how it shall be spent.

Taxes and Prices

Where indirect taxation is concerned, here again it is commonly assumed that the taxes on commodities are an extra charge to the purchaser. In fact price increases caused by taxes are no different from increases due to other factors. Although the introduction of Value Added Tax in Britain has made the prices of many commodities rise (though some have fallen, or risen less than they would otherwise have done), few people would think of it as a reason for continuing inflation; and even fewer would think of taxation as a reason for the difference in prices between 1914 or 1939 and now.

Government policy over indirect taxation in the past has always been to seek industries where monopoly or near-monopoly conditions ruled, demand for the products was fairly inelastic, and high profits being steadily made; and then to “cream off” some of the profit. It is by no means true that the tax must be passed on as an addition to retail prices. In Benham’s Economics (1967) F. W. Paish says:

In practice, however, a monopolist seldom charges a price high enough to maximize his profits . . . The normal response of producers is to “pass on” the tax to consumers by adding it to their selling price. They may discover after a time that their sales fall off so much that their best course is to reduce their prices somewhat, but to begin with they are likely to add on the full amount of the tax.

The position may appear slightly different with VAT, since the tax takes the form of a straight percentage addition to the retail price. The increasing practice is for prices to be stated “including VAT” instead of naming a separate price to which tax is added. In other words, the producer or seller still seeks the best price he can get, taking the tax he must pay into consideration: prices are prices, just as wages are wages.

The Rates Bill

To workers who are householders, it seems undeniable that rates are an increasingly heavy burden on them. Since there are misunderstandings over what rates are for, it may be worth explaining that they pay the running costs only of local government administration and services: staff salaries, welfare services, the maintenance of schools, roads, sewers, etc. The maintenance of Council housing is normally a separate fund which must be supported from the housing income.

Capital expenditure — the building of houses, flats and schools, the provision of roads and sewers etc. — does not come from rates. The large sums required for these are borrowed by local authorities, if and when the projects are approved by the government department involved. Local government is the branches of central government; its work implements the policies of the central government, by whom its expenditure is controlled.

Rates are a charge on property, and before rent restriction (starting in 1914) diminished private landlords the rates were paid by them from rent revenues. Since that time, house rents have divided into “inclusive” and “exclusive” of rates; in the latter case the tenant pays the rent to the landlord and the rates to the local authority. It is a matter of landlords’ book-keeping — most local authorities still offer a 10 per cent,.reduction for rates paid en bloc, but not many landlords think it worth while. The effect has been to create the impression that it is the tenant who is the ratepayer; whereas he does not own the house, and is only paying in two parts what he would have paid in total.

The position has been further complicated by the growth of owner-occupation, to the point where alternatives to the rating system are now being urgently considered. The most popular suggestion, though made vaguely, is a “local income tax”. Insofar as a great many workers have thought (encouraged by deceitful political catchphrases like “a property-owning democracy”) that acquiring their own house was a step upward, it is a tragedy that they acquire only crippling mortgage repayments and are caught in a system of charges intended for bigger fish altogether. When an alternative system is produced, it will show where the burden of supporting government correctly lies.

Socialism, not Reform

One of the hopes of working people when they vote is for reductions in rates and taxes. They hope for "tax concessions”, i.e. that their take-home pay will be increased by the deductions being lightened; and for changes in the situation over rates so that they have to pay out less. Their belief is that these changes would make them substantially better off.

A simple answer is to look at times, not so many years ago, when few workers were conscious of income-tax problems or received rate demands and prices were lower. Were they better off ? Alternatively one may ask if, supposing it were possible for a government to make tax and rate alterations which favoured the working class, the employers would readily accept the consequent jump in wages ? Hardly. Any fall in the cost of living has always been followed by the forcing down of wages, as happened in the early nineteen-twenties. The general lowering of wages was, in a short time, practically equivalent to that of the cost of living. Farm workers’ wages, which were 46s. a week in 1920, were 29s. by 1924 and remained at that level up to 1939.

Reformers exist by persuading workers that adjustments and reallocations within capitalism can change their situation. Before the war Dean Inge wrote in the Evening Standard: “Popular education is taking the bread out of our mouths.” He was voicing the belief of workers who considered themselves “middle-class” that they were being ruined by taxation; the same section of the working class now complains of being ruined by the rates instead.

The level of taxes makes no difference to the continual struggle to keep abreast of the cost of living, as the history of legislation in our lifetime shows. It is an error to think that rates, taxes and prices are an issue for the working class; the only issue is Socialism.

Robert Barltrop

The Town and Country Planning Bill (1947)

From the March 1947 issue of the Socialist Standard

“A man will no longer be able to buy farmland at £200 an acre in the hope of reselling it as a factory site at £600 an acre. True, it will be worth more as a factory site—but the State, through a Central Land Board, will collect all or most of the difference” (Daily Herald, 8/1/47).

Thus the Labour Government carries out a longstanding demand made in the interests of the industrial capitalist. H. M. Hyndman, in his “Economics of Socialism,” dealt with this. After reviewing the Ricardian theory of rent and the many objections which present themselves to that theory, he wrote: —

“It seems, therefore, that a wider definition of the rent of land under Capitalism is needed than that, given by Ricardo, and the following is suggested: Rent of land is that portion of the total net revenue which is paid to the landlord for the use of plots of land after the average profit on the capital embarked in developing such land has been deducted.”

On the question of confiscating rent he pointed out that it “would not affect the position of the working portion of the community unless the money so obtained were devoted to giving them more amusement, to providing them with better surroundings and the like. . . . In fact, the attack upon competitive rents is merely a capitalist attack. That class sees a considerable income going off to a set of people who take no part in the direct exploitation of labour; and its representatives are naturally anxious to stop this leakage, as they consider it, and to reduce their own taxation for public purposes by appropriating rent to the service of the State. That is all very well for them.”

On this point Marx says: —

“We can understand such economists as Mill, Cherbulliez, Hilditch, and others, demanding that rent should be used for the remission of taxation. That is only the frank expression of the hate which the industrial capitalist feels for the landed proprietor, who appears to him as a useless incumbrance, a superfluity in the otherwise harmonious whole of bourgeois production.” (“Poverty of Philosophy,” Kerr edition, 1920. Page 176.)

“Rent,” says Marx, “results from the social relations in which exploitation is carried on. It cannot result from the nature, more or less fixed, more or less durable, of land. Rent proceeds from society and not from the soil.” (P. 180.)

(The above quotations are used by H. Quelch in his Introduction to Marx’s “Poverty of Philosophy,” Kerr edition, 1920.)

Horatio.

50 Years Ago: Rates and taxes (1962)

The 50 Years Ago column from the March 1962 issue of the Socialist Standard 

Rates and taxes are imposed to cover the cost of local and national government. The employing class — the possessors of property — in order to maintain their existence as a ruling class, must pay the various charges incurred by employing an army, navy and police force. The ever-growing body of officials they appoint; the numerous departments they have to run to make smooth the working of capitalist commerce; the interest on their “National” Debt heaped up by the cost of past wars: all these have to be paid, and the problem ever facing our masters is—which section of the propertied class is to provide the money?

The employing, or capitalist class, though face to face with the workers they are as one, are composed of many sections, differing in their day-to-day interests. Right through the history of taxation the spectacle has been seen of one section of the propertied class trying to shift ‘the burden of taxation’ on to another class, and the question in many minds is: Can they shift it on to the working class? We answer, No! The working class do not own property. They exist alone by selling their energy (their power to labour) to the employing class, the owners of the means of production.

The employers take the whole of the wealth produced by the working class, merely giving back to the workers on an average, enough to maintain them in a condition to go on producing wealth.

This portion which is given to the workers—when their masters find it profitable to employ them—is like the fuel put into the furnace of an engine’s boiler, or the food given to the horse. It is the indispensable material without which they cannot be kept working. Clearly, then, the expense of carrying on their Government must be borne by our masters alone.

[From the article, 'Rates and Taxes. Do they fall upon the working class?' by Adolph Kohn, Socialist Standard, March 1912.]

The Forum. (1909)

Letter to the Editors from the March 1909 issue of the Socialist Standard

Some Open Discussions

Statements of difficulties, criticisms of our position, contributions upon any question of working-class interest, are invited. Members and non-members of the Party are alike welcome. Correspondents must, however, be as brief as possible, as bright as possible, and as direct as possible to the point.

______0______

ENQUIRER (Manchester) submits the following queries, to which replies are appended :

(1) In “Capital” we read, “along with the surplus-population, pauperism forms a condition of capitalist production, and of the capitalist development of wealth. It enters into the faux frais of capitalist production ; but capitalism knows how to throw these for the most part, from its own shoulders to those of the working class and the lower middle class.” (p. 65 Vol I.)

This statement, and one to the effect that high or low rates do not affect the condition of the workers as rates are paid by the capitalist class, would appear to be contradictory.

____________

It only appears contradictory. The statement quoted from Marx amounts to, in effect, asserting that the capitalist class retain as much of the wealth produced as possible, making real wages keep as close to the subsistence level as is economical. The maintenance of the non-producers—whether they be “unemployed,” children, aged persons,or what not—enters into the “dead expenses” of capitalism, and while not entering into the factors determining real wages, except in the case of children, is, so far as possible, shouldered onto the workers, and largely borne by them, as witness the extent of Friendly and Benefit Societies, and Trade Unions. Even the maintenance of official paupers is, if at all manageable, transferred to a son, daughter, or other relation in the case of parents, while now the endeavour is being made to fix upon the individual the responsibility of maintaining a pauperised grandparent. Where these items are shouldered on to the workers it assists in keeping those expenses down to as low a level as possible, and incidentally, by swelling the quantity of money wages, further cloaks the extent of exploitation.

____________

(2) If it is cheaper for the capitalist class, as the payers of rates, to give old age pensions to worn-out veterans of industry rather than have them go into the poor law institutions, why have the recipients of poor law relief within a certain period prior to Jan. 1st, 1908 been debarred from receiving the old age pensions ?

____________

The present Government has the whole question of the Poor Law in the melting pot. To empty the Poor Houses would be to dislocate the Poor Law system before the alternative machinery is laid down and perfected and possibly precipitate trouble. At present there are the two systems working side by side, and the relationships are largely at the disposal of the Poor Law authorities. We cannot explain their motives. Perhaps they consider a twelve month’s course of training in soliciting charity a necessary preliminary to attempting to eke out an existance on 5s. per week.

The fact, however, that the Poor Rate is levied locally while Old Age Pensions are a national charge, is one reason why the transposition could not be made so suddenly as to complicate the question, and risk alienating the political support of any section which might be affected by the change.

____________

(3) If the capitalist class pay the rates why do they not take the credit unto themselves for so doing, instead of telling the workers that they are as much interested in the rates being kept low as the capitalists themselves ?

____________

The answer to the first question meets this, at any rate in part. By interesting the working class in the maintenance of the non-producers, their support is enlisted in keeping the necessary expenses as low as possible, although the fact remains that as an item over and above the bare maintenance of the individual it must encroach upon the difference between the minimum on which the individual can live plus the raw material he obtained, and the total production, and so reduce the ideal degree of exploitation towards which the capitalist class strive.

Answers to Correspondents. (1910)

From the December 1910 issue of the Socialist Standard

“Barber.”—(Wigan.) 1. In Adam Smith’s day 3 per cent. was the usual rate of profit for sound security. To-day L.C.C. stock, second only to Consols, are issued at 3 ½ per cent. In many cases as large rates as ever are made to-day. The Cold Storage Co. paid over 100 per cent., some of the electric power companies have made similar profits, while some of the catering firms pay dividends of 30 to 40 per cent year after year.

The amount of profit apart from the rate, has of course increased enormously with the increased productiveness of labour.

2. Surplus value is the portion of wealth remaining after paying wages, cost of raw material and of machinery used up in the given time. But this as a rule undergoes further deduction for rent for the land, interest, and rates and taxes. The portion of the surplus value that remains is the capitalist’s Profit. Profit, therefore, is only a part of surplus value.

3. What you pay for your tobacco and sugar is their market prices, and taxes are the smallest factor in fixing these prices. The workers only receive sufficient to keep them in working condition, hence have no margin wherewith to pay taxes. See ” S.S.” for October 1904 and June 1905 where the matter is fully dealt with.

4. If you will send particulars of numbers joining we shall be pleased to help you.

5. Yes, old age pensions etc, do come out of surplus value, as shown by answer to question 3.

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E.C.R. asks “How do the S.P.G.B. propose to overthrow the present system of society and establish Socialism on Democratic lines and legislative means without Man and Woman Suffrage?”

The Socialist Party is not opposed to Adult Suffrage, but maintain that the working class have quite sufficient votes at their disposal to effect the revolutionary purpose when the class are sufficiently class conscious to make the time opportune. It is a question of education, not of extensions of the franchise ; and since the line of social cleavage is drawn through classes and not through sexes, there is nothing undemocratic in proposing to proceed even with our present limited male suffrage.

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E. Garvey asks how non-producing workers (instancing insurance collectors) can be exploited.

If 5 hours social labour produces a day’s energy, and the worker is compelled to render ten hours labour for the day’s necessaries which have taken only 5 hours to produce, then, no matter what the result of his labour (and the capitalist will see that it has some tangible result), he is exploited. Apart from this, however, even the so-called non-producing workers are necessary to the operations of the capitalist class, and Friend Garvey must not forget that the workers are exploited as a class since as a class they are deprived of the means of living except through wage slavery.

Replies to other correspondents held over.

50 Years Ago: The taxation of land values (1963)

The 50 Years Ago column from the December 1963 issue of the Socialist Standard

In dealing with the question of Taxation of Land Values it must be remembered that the advocates of this measure, from Henry George to Joseph Hyder, always assumed the retention of capitalism in all its other features.

Under such conditions there is no difference in principle between taxing land and taxing lace. Both are cases of the Governmental powers being used to take wealth from members of society for general purposes—as wise old Benjamin Franklin saw.

Taxation is, of course, necessary under capitalism, and the only question is, how shall the “burden” be apportioned among the taxpayers—the capitalist class. The land-owning section are quite sure the “burden” should not be placed on them, while the industrial capitalists are equally certain that they should not be called upon to pay. Hence the minor quarrel between them over taxes.

But under capitalism the joining together of these two sections into a land-owning industrial capitalist group is steadily increasing. For them the problem is solved. From the general capitalist standpoint the portion of wealth best able to bear the “burden” of taxation is land, as it disturbs the production and distribution of commodities— the great factor of capitalism—less than any other method of raising the sum required. Hence large landowners who happen to be still more largely interested in industry, favour taxation of land values, to the great bewilderment of “the man in the street,” who finally explains a landowner being in favour of taxing land by the theory that he is ”a good man.”

Except, then, as an indication of the development of capitalism, and the concentration of both land and industrial capital into fewer hands, taxation of land values, even up to 20s. in the £, no more leads to Socialism than would taxation of toffee. On the contrary, it would merely be one of the steps in the more efficient organisation of capitalism for the benefit of the capitalists.

['The Forum: Taxation of Land Values' by Jack Fitzgerald, December 1913 Socialist Standard.]

Cooking the Books: Axe the rich (2025)

The Cooking the Books column from the August 2025 issue of the Socialist Standard

One of the measures being urged on the government to solve its ‘fiscal problem’ is ‘tax the rich’ by means of a levy on the personal wealth of some capitalists.

‘Advocates of a UK wealth tax, including Lord Kinnock, have proposed an annual 2% tax on wealth above £10m. Wealth tax campaign group Tax Justice UK has calculated this would affect about 20,000 people — fewer than 0.04% of the population — and raise £24bn a year’ (Sky News).

According to the latest figures (for the period 2020 to 2022) from the Office for National Statistics, ‘The wealthiest 1% of households had wealth of at least £3,121,500’.

So, the proposal would only affect some of the super-rich, not even all of the ‘top 1 percent’, let alone the whole of the capitalist class.

The ‘fiscal problem’ facing the British capitalist state, which Labour currently has responsibility for running, is how to pay for its essential spending on such things as the military, education and health for the working class, ‘benefits’ for those not in work, as well as its own administration. This can only be covered by money raised from taxes or through borrowing. The government doesn’t want to borrow more since this risks raising the rate of interest it has to pay lenders; which in turn increases the amount of tax it would need to raise, since taxation is the only source it has of money to pay the interest on its debts (the so-called ‘National Debt’).

The irony is that all taxes already fall in the end on property and property income, irrespective of who pays them in the first instance. Obviously corporation tax, income tax on dividends, capital gains tax, inheritance tax, and employers’ national insurance do so directly. But other taxes do so indirectly.

To be able to work efficiently workers require a given standard of living and an adequate money income to pay for this. By and large, though not automatically, what workers are paid goes up in line with the cost of living. If this rises, so sooner or later will wages. Taxes such as VAT on what workers need to buy to maintain their working skills are in effect passed on to employers. Similarly with a direct tax on wages; this too gets passed on. In fact, with PAYE, workers never even see the tax part of their nominal wages; what counts in terms of maintaining a standard of living appropriate to their working skills is their take-home pay and what it will buy.

Arguments about taxation are essentially arguments about how much in taxes particular sections of the property-owning class should pay. Taxes on wages and on what workers consume fall on employers. A wealth tax would be a tax on what capitalists consume in extravagant living and would enable part of the burden of taxation to be shifted from employers on to the super-rich. It wouldn’t make any difference to workers.

A wealth tax also implies the continued existence of the super-rich. One of their arguments against it is precisely that one effect of such a tax would be to drive some of them out of the jurisdiction of the British capitalist state.

Socialists don’t want to maintain the rich so that the state can milk them. Nor do we want to redistribute their wealth amongst the rest of the population so as to try to achieve a more equal society contrary to capitalism’s nature. We want the means for producing wealth to be commonly owned by society as a whole so that they can be used, under democratic control, to directly provide what people need. We don’t want to tax the rich. We want to abolish the division of society into the rich and the rest.