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.

S. D. P. and taxation. (1909)

From the October 1909 issue of the Socialist Standard

H. M. Hyndman (S. D. P.) in Justice, 7.8.09, says that “If Mr. Lloyd George were to bring about a reduction of Rates and Taxes by the Confiscation of rent for that purpose it would only benefit the Capitalist Class”, thus affirming that rates and taxes are no concern of the working class.

E. Belfort Bax and H. Quelch (S. D. F.) in their Catechism of Socialism say “that the Working Class do not pay taxes, but that they are paid out of the surplus value robbed by the Capitalist Class from the Working Class.”

Miss Kough (S. D. F.) speaking for the Watford Socialist Society on August 8th last, in advocating Adult Suffrage said that it was “only right that working class women who have to pay their share of the taxes should have a vote and a voice in the spending of those taxes.”

When asked to reconcile her statement with that of Hyndman in Justice, the organ of the party she was a member of, Miss Kough said she “was not going to be answerable for wild statements which appear in papers.” This is cruel! Poor Hyndman!

When the position of Bax and Quelch was pointed out to the lady she replied that she did “not care what they said, anybody with common sense knows the workers do pay taxes.” That is why the audience applauded the statement: it was common sense, which is so often uncommon nonsense.

But to accuse Bax and Quelch of having no sense in these matters – well, it must be spite against Bax for his attitude on the woman question. But what about Quelch? – well, let them fight it out. Where are we now? Do the workers pay taxes? According to the S. D. P. we don’t know. The S. P. G. B. have repeatedly pointed out in their organ that they do not and nothing has or can be brought forward to show they do – so the working class do not pay rates or taxes.

Watford.

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

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.

Classic Reprint: Income tax and the wage struggle (2026)

A Classic Reprint from the January 2026 issue of the Socialist Standard

Given the recent budget from Rachel Reeves and the debate about income tax rates and thresholds, we reprint this article as it will have some resonance.

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.

H. (November, 1963)

Where Labor is Robbed. (1909)

From the January 1909 issue of the Socialist Standard

Labor is robbed where labor is employed, and, directly, nowhere else. Labor is robbed in the pay envelope, and the hand that reaches the pay envelope to him and no other, directly, is in his pocket.

Labor cannot be robbed in the prices it is compelled to pay for the commodities which it consumes. For the good and sufficient reason that the cost of living determines wages. Wages always hover about the cost of subsistence. If provisions and clothing are dear, wages must go up to meet the increased cost of living, since the laborer must live before he can work. If the employer gets his profits, he must see to it somehow that his wage-slave is in working condition, just as the farmer must see to it that his horses must have hay and stabling if he is to have the benefit of their labor. The cost of hay is of no particular concern to the horses.

In an accommodated sense, labor can be “robbed” in the quality of the goods consumed, by means of fraud and adulteration but not in price.

A Battle Creek contributor to last week’s “Wage Slave,” for example, says that ”the hand of the rich man is externally in the poor man’s pocket for taxes or for the price of meat.” This is not correct. The hand of the rich man, i.e., the employer, is in the employee’s pocket in one manner only, and that is in withholding from him, in the pay envelope, four-fifths of the value he has created. They can’t make the wage-earner pay one penny of the taxes, Municipal, State, or National; and if meat sold at a dollar a pound, that wouldn’t affect him in the slightest degree, either, so long as other commodities advanced correspondingly. If the price of meat advances out of proportion to the cost of other food-stuffs containing the same dynamic energy, the result will be simply to change the form of his diet, but it can’t possibly affect his income or make it easier or harder for him to save anything.

The only workingmen in whose pockets the Beef Trust has its hands are its own employees, whom it robs, as other employers do, in their pay envelopes, and the farmer who is robbed in his pay envelope too, in an arbitrary depression of prices.

That the wage-earners do not pay the taxes is directly evident with the great majority of them who have nothing to tax. But it is none the less certainly true of those, also, who possess a small property and are rated as taxpayers. In their case, such taxes as are levied upon them enter into the cost of living, and, again, the necessary cost of living determines the wages.

Tax reform, “trust-bustin’,” cheapened transit—or if they made it free, it would be all the same—municipal lighting, lowering of rents—all these and similar measures are seen to be purely Middle-Class measures, designed either to make the big robbers divide up a little more evenly with the little robbers, or to enable the employing class to house and feed their wage-slaves more cheaply and, consequently, get them for less wages.

The one thing needful for the working-class, without which all efforts to better their condition are vanity and vexation of spirit, is the capture for collective ownership of the land and the machinery of production. When we have this, we have it all. Without we are nothing. All efforts or attempts to benefit the working-man by lowering the cost of his living will only play into the hands of the employing class.

From The Wage-Slave.

The Pillory. (1908)

From the November 1908 issue of the Socialist Standard

Mr. John Burns at Tynemouth, 14.10.08 (Daily News report) said in reference to the Tariff Reformer’s allegation that under Free Trade England was a country of vanishing trades, “If that was true (which he denied) it was unpatriotic to allege it.” Burns’s conception of patriotism is, then, a readiness to lie with all the heart, and soul, and strength, when circumstances require it. Burns is a patriot—for £2,000 a year!

* * *

David Cummings, of the Boilermakers, has gone the way of Isaac Mitchell, of the General Federation. They both have jobs under the Board of Trade, and the capitalist class will doubtless find them eager to justify their salaries. It is better so. In the ranks of the workers they were worse than useless. The workers know now where they are—and why. George Barnes is said to be in the running for a similar job. He also will be better there—if he goes. At present he denies it. But these denials are generally to be taken cum grano salis. If George doesn’t go it will probably be due to the fact that he hasn’t a biblical name. Men with biblical names seem in much greater request, witness John, Isaac, and David. Now if George had been named Barrabas——

* * *

A. S. Headingly, of the S.D.P., is advertised in the St. Louis Labor (3.10.08) as open to speak in the large cities of America at 15 dollars a time. It is not stated whether his address will consist of exhortations to the workers to keep their finger-nails clean and see that the crease in their pants is always in perfect alignment, or whether he will take as his subject “the application of soap below the collar line and its relation to the Revolution.” These grave questions will doubtless be duly considered as usual, notwithstanding that the lecturer’s fee is so low.

* * *

We have been requested to announce that “on Oct. 12th the Rev. Ernest J. B. Kirtlan, B.A., B.D., late chaplain of H.M. Prison, Wormwood Scrubs, member of Fabian Society, and lecturer for the S.D.P., will speak in connection with the anniversary of the South London Wesleyan Mission. Subject: ‘Fag-Ends.'” The combination of qualifications and the occasion, not less than the importance of the subject, have impelled us to comply. We are sorry that the address will have been delivered some weeks before we can publish the news to the world, but we have done what we could.

* * *

Act 1. Mr. W. Thorne, M.P., introduces a Bill to provide for a citizen army.

Act 2. The S.D.P. issue a pamphlet explaining what Mr. Thorne means. (This was laudable and eminently necessary.)

Act 3. Has not yet been constructed. It might properly take the form of an explanatory pamphlet on the S.D.P. explanation of Mr. Thorne’s Bill.

* * *

Mr. A. E. Wachter is, I understand, a well-known Clarion Scout in his own neighbourhood. He writes to the Sunday Chronicle to enlighten a “middle-class father of eight,” who seems to have alleged that the working “classes” do not pay rates. Mr. Wachter says the working “classes” do pay rates. Mr. Wachter should read THE SOCIALIST STANDARD regularly. It would save him making exhibitions of ignorance. The working class does not pay rates; and there is only one working class. To refer to working classes is absurd.

* * *

“He did not care tuppence ior the abstract opinion of any man who did not come into his trade union and plant down his little bit of money and do his little bit of work.” (G. N. Barnes, M.P., Salford, 4.9.08.) The value of a man’s views is in proportion to the regularity with which he planks down his little bit of money in the union. Mr. Barnes is refreshingly frank.

* * *

At the Sanitary Inspectors’ Conference at Liverpool on the 9th, Sir J. Crichton-Browne said that if Mrs. Hemans were alive she would have to add another verse to her well-known poem in eulogy of tenement buildings. It would probably run, he said, thus—

The tenements of England, piled tier on tier on high.

Stand not by brooks, in verdant nooks, that rest and glad the eye,

But they rest fair, in sun and air, are clean and free from croup,

And safely there the weary sleep, and the sickly cease to droop.

If this is humour it is of the type that requires labelling. If it is not perhaps the least unkind remark one could make would be that Sir J. C. Browne’s poetry is at least as good as his facts; to which might be added that while the poet may properly claim licence for his fanciful figments, the scientist must make his appeal on more solid ground.

Chapter Four: Taxation— Dilemma & Deception (1984)

From Samuel Leight's book, The Futility of Reformism

Taxation is a dominating, reformist activity generating an inferred assumption that it possesses similar economic consequences for both the capitalist and working classes, varying only in degree. The socialist attitude contradicts this inference and asserts that the real burden of taxation is borne by the capitalist class, that the whole question has become a misleading, dangerous red herring diverting the working class away from their true interests. Our proposition may startle the uninitiated; however, we are dealing with a complex system of society, notorious for its deceptions, which invariably favor the rulers and not the ruled.

In order to properly evaluate the taxation process two essential factors must be properly understood: first, the value of labor power and how it is determined; second, the purpose of taxation and the related function of the state machine.

Wages represent the price of labor power and are determined by the cost of production of the worker. Members of the working class receive a sufficiency in the means of subsistence in order that mental and physical energies may be utilized during the working day. In addition, children must be raised, who will eventually become workers replacing those who have either died or gone into retirement, forced or otherwise. Wages attempt to cover the costs of food, clothing, shelter and the various amenities and necessities of life that are needed to maintain the worker and his family. The wages paid to the working class as a whole always approximate to a minimal amount related to their survival costs, adjusted on a continuous basis, through perpetual struggle, to a supposed cost of living figure. Labor power is therefore a commodity containing a use and exchange value, priced in the form of wages. Gross wages are subject to various deductions that result in a “take home pay.” This sum, however, does not indicate the true worth of the remuneration until the worker ventures into the market place to make purchases. “Real wages” are equal to the total sum of the various commodities that the worker is able to purchase with the net amount of money received. 

Under the taxation facade gross figures are stated from which tax deductions are made. The actual sum deducted as taxes also represents a portion of the gross wages—wages that in actuality the worker never receives except solely as a book-keeping item. This of course he “can’t eat,” but the euphoria created by the magical appearance of the figure and its swift demise is tantamount to a colossal deception and a cruel hoax. In reality, and most certainly over the longer term, it does not matter whether taxes are “high,” “low,” or even non-existent. The worker will eventually still only receive an amount equal to what is required for himself and his family’s maintenance. Laws, for example, could be enacted which at various times might eliminate taxes altogether; convey free rent, free transportation, and health and welfare subsidies. All these “benefits,” in the final show-down, would then be reflected in wages adjusted downwards in order to offset the illusory gains. This would not, of course, take place automatically, or immediately upon these measures being passed. The struggle over wages between the workers and their employers, through trade union action and by workers without organized representation, is a continuous one. Wage adjustments take into consideration allowances previously granted by an employing class well protected by efficient accountants and sophisticated managers. It should also be realized that any subsidies or services paid by governments out of taxes make the capitalist class a prime beneficiary, because without them the cost of living of the workers would increase and wages would consequently rise.

And so the paraphernalia of regular income tax deductions takes place together with an annual “settlement sheet” in the form of a Tax Return. The average worker gripes about “all the taxes” he has paid and fantasizes about how much better off he would be if he paid less taxes or if,perchance, he paid none at all. At this juncture, workers would do well to review past history where, for example, prior to World War II in the U.S., less than 5 million people paid federal income taxes. Similarly, large numbers of workers in England paid no taxes until after the war. All the multi-millions of these tax-free workers in by-gone eras endured a relentless poverty that was completely impervious to the tax-exempt status of the majority of the population. Poverty, both past and present, is basically unaffected by the taxation “levied” on the workers through a devious, intricate accounting system. The working class are not poverty- stricken because of taxation and their plight cannot be cured by tax adjustments. They are poor because they are property-less in the means of production and distribution—that is the crux of the problem!

The working class are led to believe that they are in fact making real, valid tax contributions which are going either directly or indirectly towards the support of “their country” and “their affairs” — a necessary evil, so to speak. The deception, instigated with superficial deductions and paper-work, has been impressively initiated, reality cunningly disguised. It matters little as to whether the ruling class and their representatives, either individually or collectively, are properly aware of the illusion created — this is beside the point. Obviously the majority of the capitalist class, like their dependent wage-slaves, are completely oblivious to the true nature of the system’s economics; possibly just a small minority are fully cognizant of all the ramifications of the tax scam.

From the aspect that all values produced in capitalist society are the result of the efforts of the working class alone, in this sense only workers produce all the wealth from which taxes are paid. Further, inasmuch as the tax forms legally designate the individual worker as the payer superficially, the workers nominally are paying taxes. But this is a graphic example of the deception of appearances. Taxes are payments which the capitalist class are forced to relinquish from the surplus values produced by the working class over and above the wages they receive, in order to pay for the various expenses needed to preserve the system’s survival and its administration. This is a necessary burden borne by the capitalist class and camouflaged by fancy form-filing and adroit misrepresentation.

Let us suppose that a worker earning a gross wage of $400.00 per week had taxes of $100.00 deducted, leaving him with a net take-home sum of $300.00 (for the purpose of this illustration, we are disregarding all other standard deductions). The capitalist is parting with $400.00 in an actual payment out of which $100.00 goes towards taxes under the name of the employee. Assume, hypothetically, that laws were changed so that the worker no longer was obligated to pay taxes but this item was shifted to the employer. Further, that at this particular time the total amount of taxes required by the Government in its effort to defray expenses remained the same and wage levels were unchanged. Both the monetary position of the capitalist and the worker would remain unaltered. The capitalist would still be paying out, over the long term, the $400.00 out of which a $100.00 would be allocated towards taxes at some future date; and the worker, you can rest assured, would still wind up receiving his $300.00. The only difference would be a transfer of the taxes credited to the employer’s name. Although wage levels and taxes do not operate with the rigidity that the foregoing example would imply, nevertheless the theory is sound based upon the determination of the value of wages and the formulation of surplus values produced by the working class over and above wages paid. From this surplus value the capitalist class derive their livelihood and are obligated to sacrifice a percentage, in the form of taxes, in order to protect their holdings.

The present arrangement is a clever camouflage, far superior to the example just given, that conveys an impression of higher wages being paid, with workers erroneously assuming that they are actively participating in affairs of state through their tax contributions. Incidentally, as an alternative to reducing wages it is far more subtle to “increase taxes.”

The working class are under the mistaken impression that they are joining with their employers on a somewhat comparable footing when they add their names and payments to the tax forms and - subsequently learn how the total national tax proceeds are allocated. Taxation is used for the upkeep of the state which covers a vast conglomeration of institutions, functions and services that exist to preserve and protect the capitalist system of society and the interests of the capitalist class—not those of the workers! The armed forces, police, judiciary, tax revenue departments, bureaucracies, welfare and social agencies, armaments, (euphemistically termed “defense”) are all part of the intricate state mechanism which is operating at all times for the protection of the status quo. The working class have had bestowed upon them, under the guise of taxation, the dubious honor of associating with their masters, on a superficial basis only, in the upkeep of a modern-day gargantuan monster—an instrument of economic oppression and an acknowledged legalized killer, with a potential for worldwide destruction.

For the capitalist class taxation is a never-ending dilemma, an irremovable thorn in their side, that demands national contributions of astronomical proportions to cover the overheads of the system. Although the burden is large, it nevertheless does not infringe upon their ownership rights, still allowing them to live in riches as compared to the poverty of the majority. The capitalist class, through their representatives, wage a constant battle amongst themselves as to which sections of their class should bear the various burdens of direct and indirect taxation. The merchants, real estate operators, manufacturers, bankers, for example, are lobbying continuously over tax matters, attempting to keep their own contributions as low as possible, and caring little should the costs fall upon their class compatriots. Truly a case of legalized robbers squabbling over the costs of the robbery! Much of the time and energies devoted by the main political parties revolve around tax issues; how collections should be accomplished, to what degree, in which areas, and a determination of expenditures.

Government spending receives its income via taxation or through the inflation of currency, which in its turn creates a general rise in prices. Governmental tax planners and reformists agonize over the theory that tax increases, which are obviously needed to defray budget deficits, will have a negative effect on business activity; that conversely a cut in taxes might act as a stimulant. The so-called policy, absurdly entitled Reaganomics, ironically put forward this approach which was previously espoused by their supposed political opposites,the Democratic Party during the late President Johnson’s administration. The U.S. national debt reached the mathematically incomprehensible figure of $1 Trillion in October, 1981 coupled with an ongoing Budget seemingly impossible to balance. Such facts are presented to the working class as if the problem was theirs and not their masters. Workers who spend the whole of their lives scrimping, saving, and as perennial debtors, who in most instances are unable to keep within their own paltry budget, are apparently expected to become concerned in the problems of the ruling class under the false premise that their interests are involved.

The national debt, significantly reported to be about 34 per cent of the Gross National Product, (i.e., the value of goods and services produced by American workers every year) is“underwritten” by the working class. Their physical and mental energies are the tangible resources that represents a labor force which makes feasible all the profits on the one hand while offering future “collateral” for the state’s indebtedness on the other.

The ramifications of taxation are so manifold that they provide a livelihood to armies of bureaucrats, accountants and tax attorneys. Each year new publications are printed which attempt to unravel and explain a veritable morass of tax laws. In fact, in order to strive for more simplification a U.S. Flat-Rate-Tax is now under consideration which, if adopted, would apply across the board the same percentage rate regardless of the amount of taxable income. The taxing of capital gains, short and long term, and estate taxes, are always being scrutinized and adjusted. The complexities are mind-boggling. The rich and super-rich establish protective trusts, use charities, plus a multitude of devices which, together with the nature — of the system itself, substantially protects their holdings both for themselves and their heirs. The tax payments never make the rich poor, nor the poor rich.

Members of the working class who own homes make property tax payments that go towards the upkeep of local governments, services and allied costs. However, a large proportion of this real estate is heavily mortgaged, with the consequence that in reality the Banks, Savings and Loan Associations and Insurance Companies own far greater equities in the properties than the actual tax payers. In effect, therefore, the workers’ payments in this instance is related to a creditor’s holding that is larger than their own. The funds are being used, just as they are with the Federal Government, to help maintain a system that exploits them. In any event, similar to the sales taxes that are added to commodity prices, in the overall picture these items are factors that are incorporated within the cost of production of the worker and the amount of wages received. This does not imply that wages can be expected at all times to satisfactorily and automatically cover all costs paid by the workers for their survival— far from it.We are dealing here with general economic positions that are subject to the effectiveness of the class struggle, from the working class standpoint, at any given period. Should taxes increase, or the cost of living goes up, without an immediate wage adjustment, then the worker’s situation is temporarily worsened. However, assuming that the workers continue their struggle to maintain and increase wages as conditions warrant and allow, it is the longer term outcome that becomes operative. Wages are adjusted on a continuing basis, related to the cost of living, the militancy of the workers, and the existing state of the capitalist economy.

The reformists will never cease in their efforts with tax matters. Taxation, however, is not a working class issue. Energies should be devoted to maintaining and increasing the net wages paid as general circumstances allow, with the understanding that this is in line with working class interests, while campaigning over taxation isa futile waste of time—a mythical non-issue. There is, in fact, only one issue—the establishment of socialism.

Taxes not a working-class issue (1974)

From the June 1974 issue of the Socialist Standard

The 70th anniversary issue of the Socialist Standard carried throughout its pages a series of snippets from old Socialist Standard articles highlighting the SPGB's unique position on issues of the day. Where possible, I've provided a link to the full article.

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 ?

[From “Rates and Taxes — Do they fall upon the working class?” Socialist Standard, March 1912]

Letter: Taxing Problem (2009)

Letter to the Editors from the January 2009 issue of the Socialist Standard

Taxing Problem

Dear Editors

In “My Cupboard is Bare” (Letters, Socialist Standard, November) the letter writer states many inaccuracies – “he doubled the income-tax burden on the poorest earners in society.” – “The working-poor, whose income-tax he doubled, do not bother to vote, (as he knows) for we, the low-paid, realise that there is no-one worth voting for.” – “Middle-England, on middle incomes, voted Labour into power, and for that voting-base income-tax was reduced in an attempt to retain support for the Labour.” – “If the British government makes yet another “mistake” of having ordinary hard-working British citizens bail-out British banks and the greedy millionaires who helped cause the problem…”. This might be worthy of comment.

Glasgow Branch

Reply:

We published the letter as an expression of opinion by a discontented worker. We agree that it is inaccurate to imply that income tax is a burden on the working class and that it is workers who are bailing out the banks.

Workers are exploited at the point of production but are paid more or less the value of the working skills they sell, i.e., enough to buy what they need to reproduce and replace them. If the government imposes a tax on wages, this will eventually, after a struggle, be passed on to employers as the cost of reproducing the workers’ skills will have gone up.

In any event, in Britain, most workers don’t even personally pay income tax as they do other taxes by going to the post office or writing a cheque as this is deducted at source by the employer and paid by them to the government. In this case what is important is take-home pay. This said, when the government does change income tax the take-home pay of some individual workers can go up or down for a time, and did go down in the case the letter writer mentioned.

Although the money to bail out the banks will have ultimately come out of the surplus value extracted from the working class, it has not done so directly – the capitalist employer extracts the surplus value, part of which is paid to the government as taxes, some of which was used to bail out the banks.

Editors.

Producing and paying (1932)

From the December 1932 issue of the Socialist Standard

A correspondent asks if it is correct that “Labour is the source of all wealth.”

The answer to this question is “No.” To say that “Labour is the source of all wealth” would mean that Labour of itself is some kind of inexhaustible reservoir from which wealth (articles of use—or use-values) can be extracted, and would leave out of account the part played by Nature. It is the sort of loose phrase that might be justified in casual conversation if the part played by Nature is left to be understood, but as a definition to be used in studying economic laws it is useless and likely to lead to unsound conclusions.

Nature provides the materials to which labour is applied, and Nature and Labour play an inseparable part in the process of wealth production. Marx criticised the phrase “Labour is the source of all wealth.” He wrote: —

“The phrase quoted is found in all primers for children, and is accurate insofar as it is left to he understood that the work is effected with the aid of the appropriate object and means. But a Socialist programme ought not to permit itself the use of such bourgeois locutions; it ought not to ignore the existence of the conditions upon which the meaning of the phrase solely depends.” (“Criticism of the Gotha Programme.”)

The correct statement of the source of wealth is that wealth is produced by the application of human labour to Nature-given material.

Another correspondent, while agreeing with the above definition, thinks that it contradicts our contention that rates and taxes are not a burden on the working class or, as he puts it, that the workers “do not pay for armaments.”

Here, again, is need for precision. The idea behind our correspondent’s difficulty is that if the workers produce all wealth, then they must pay for everything. The ability to pay is associated in his mind with the ability to produce. But this is a mistaken notion. The workers do not produce for themselves but for their employers. The whole of the articles produced belong to the employers, who sell them and receive the proceeds of the sale. Out of the proceeds they pay away various amounts, including the wages of the workers and rates and taxes. If the armament burden could be reduced the capitalists would benefit by paying away less of their profits in the form of taxes for armaments. Not so the workers. The workers have no means of paying for anything other than the wages they receive (supplemented by charity, social services, etc). If taxes are reduced, and if, as a consequence, prices fall, the workers’ cost of living also falls, and with it their wages. The workers produce the wealth but do not own it.

The tax burden which the various groups of property owners are constantly trying to pass off on to each other, cannot be passed off on to the propertyless class.

DON.

Cooking the Books: Pocket money (2010)

The Cooking the Books column from the November 2010 issue of the Socialist Standard

“TAXMAN WANTS ALL OUR WAGES. We would just get pocket money” screamed the front page headline in the Daily Express (22 September). As the Times had explained five days earlier:

“HM Revenue & Customs is considering plans to deduct tax directly from workers’ pay packets before salaries reach their bank accounts”.

So what’s new? Income tax is already deducted before wages reach workers’ bank accounts, only this is now done by employers not the government. This in fact is one reason why we have said that, as far as income tax on wages and salaries is concerned, workers don’t even pay it. They never see the money. It’s paid by employers.

PAYE (Pay As You Earn) was introduced as part of the war-time Beveridge Plan to “redistribute poverty”, i.e. to try to ensure that the total wages bill was distributed efficiently, from a capitalist point of view, amongst the working class, so that no worker got either too much or not enough to reproduce their working skills taking into account their family circumstances.

Basically, it involved cutting the take-home pay of single workers or workers whose wife worked as they didn’t need to be paid to maintain non-existent dependants. Employers couldn’t be expected to do this themselves as their only concern was the quality of the labour power they purchased, for which they paid the going rate irrespective of the family circumstances of its seller. So it was done through the tax system

The Marxian theory of taxes and the working class is one of the most difficult concepts to get over. Sometimes it’s mistakenly expressed as “the workers don’t pay taxes”. The accurate and scientifically correct way of expressing the concept is that “taxes are not a burden on the working class”.

Even if workers don’t pay the income tax that is deducted from their pay packets before any money reaches their bank accounts, workers do physically pay other taxes. For instance, workers in employment pay council tax in that they themselves have to pay this either in cash or by a cheque or transfer from their bank account.

Workers also pay indirect taxes such as excise duties on alcohol and tobacco and VAT on the goods and services subject to it. These, insofar as they increase prices, increase the cost of living and so the cost of reproducing labour power. This is passed on to employers as higher than otherwise money wages. It is in this sense that taxes on wages and on goods and services workers consume are ultimately a burden on employers.

We’re talking here about average expenditure. Only taxes included in expenditure on goods that enter into the general average cost of living are passed on to employers, not all the indirect taxes that an individual worker might pay. Just because a worker spends more than average on alcohol and cigarettes does not mean that economic forces will lead to their employer paying them a higher wage or salary.

So, yes, individual workers can be affected, adversely or favourably depending on their spending habits, by changes in the taxes they pay. Naturally those who end up worse off will complain, but this is not a class issue as an issue that concerns workers as a whole.

Whether income tax is deducted by employers or by the government is certainly of no concern to workers. What’s relevant is not the gross pre-tax figure that appears on their pay slip, but their take-home pay as that’s what they have to spend on reproducing their working skills. “Pocket money” is rather an apt