Thursday, April 30, 2015

Cooking the Books: Squeeze the Rich? (2015)

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.

Editorial: Coalition Politics (2015)

Editorial from the May 2015 issue of the Socialist Standard

The Lib Dems have come up with a seemingly perfect alibi for the notorious betrayal of their promise to abolish the tuition fees that the previous Labour government had imposed:  that they were in a coalition government and this meant that they had to give up some of their promised policies in order to reach an accommodation with their partners in government.

Now that coalition governments seem to be the order of the day this is a get-out-of-jail card that all parties can play. And seemed to have been preparing to do so.  At least this is what was suggested by  the increasing extravagance of their promises as the election campaign went on. They seemed to know they would have a ready-made excuse for not honouring them.

Using the need to compromise with coalition partners as an alibi, however, is not one that will hold up. Most election promises cannot be honoured even if there is a single party government with a decent majority. That’s because they are promises to make capitalism work in a way that it simply cannot be made to.

An adequately funded NHS and affordable housing are examples. Such reforms cost money, money that can only come in the end, in however roundabout a way, from profits. But profits are the life-blood of the capitalist economic system. Which is why they have to be given priority over meeting people’s needs adequately. And why governments always end up according this priority, despite what they may have promised.

The only way a government could, for instance, get more affordable houses built (apart, that is, by giving people more money to spend,  but nobody would believe any party that promised that) would be to subsidise this. Houses are built by profit-seeking companies and these are not going to invest in building houses to sell to people who cannot afford to buy them. Left to themselves, they invest in building houses for people  who can afford them; these days, upmarket  houses and flats for the better off, whether bought to live in, rent out or leave empty as a speculative financial asset.

The money to subsidise affordable housing – or an adequate health service or reducing inequality or eliminating child poverty or any of the other laudable promises we heard – would have to come either out of taxation, which will ultimately fall on profits, or from borrowing from the rich, which will incur legally-binding interest charges which will have to be paid out of taxation.

Any government which reduced take-home profits in this way to promote a better life for people would provoke an economic slowdown. Which would create other problems for people. It’s a lose-lose situation but one that is built-in to capitalism.

Coalition politics won’t end this. All it will do is provide parties with another specious excuse for not honouring promises which can’t be honoured anyway. Just wait and see.