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.
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