The bosses have tried every imaginable remedy for the crisis. To no avail. Now they hope to find a lever to raise their profits by lowering taxes. The campaign to lower taxes has swept the bourgeois world like wildfire. Through every avenue at their command the capitalists and the landlords are clamoring for economy in government. They want “cheap government” and the support of the working class to force a curtailment of expenses. We workers are robbed as producers, robbed of the surplus labor, of the surplus value which the capitalist divide among themselves as profits, rent, interest and to pay their office boys’ (government) and for the gangster racketeers who rob the robbers.
The government (the state) operates for the benefit of the capitalists, owners of the basic means of production and circulation of all commodities and wealth. Government functions through an army of administrators and officials who must be supported. Taxation is the general method by which capitalists collect State revenues to keep the State going. Under the modern development of capitalism, however, the State has been impelled to undertake large economic tasks which private capitalists may not be able to do, such as the welfare provisions for the young and old, the sick and the infirm, and those unable to work, as well as construction of transport infrastructure and communications networks, research and development projects, and, of course, defence which all call for large expenditures to be met by taxation. The government is often placed under huge debts by the capitalists so that heavy interest rates have to be paid through taxation. Taxes can assume many forms and without taxes the State could not maintain itself. Modern capitalism has also requires adequate housing, sanitation, health, and educational facilities. For this the State must impose and collect tax.
But on whom can the tax be levied? It is clear that taxes can be paid only by those who have the wherewithal to pay them. Taxes, on the whole, must be paid by the propertied classes, by the big and the small bourgeoisie who are divided into many sub-sections each one trying to throw the weight of taxation onto the others. Hence a bitter fight arises over which sections of the capitalist class shall have the dominant voice in the taxation process. A myriad of ways are found to minimize the effects or to avoid taxation by the various groups, including: tricks of omissions evasion and avoidance, exceptions, exemptions, rebates, preferences, tariff arrangements, subsidies, etc.. One thing capitalism cannot do is kill the goose that lays the golden egg; it must not destroy by taxation the overall production or productive development of the country. Since capitalism is the structure of a country’s economic strength and power, the State must not hamper too greatly that growth by taxation.
As part of the cost of business the capitalists have to pay wages. Generally the worker receives in return for the sale of his labor power to his employer wages that will buy necessities enough to: (a) replenish that labor power, (b) allow the worker to keep in reasonably good health, (c) allow the worker to go to and from work and to seek work freely, (d) allow the worker to maintain an average family to reproduce children who will survive to become the wage-slaves in the future, including the maintenance of a wife and aged parents, (e) permit the family to survive in bad time of depression and of unemployment, as well as in good times of prosperity, since both aspects are inevitable processes under capitalism.
Wages paid the workers have to be large enough to be sufficient to cover periods of unemployment and to provide for old age. In the past often this level of wages had not been paid and long periods of unemployment have found a destitute and rebellious working class increasingly difficult to control, especially as these workers became class-conscious. Hence arises the need for establishing a compulsory unemployment saving fund that will at least partially guarantee that the wages paid will cover periods of unemployment as well.
The level and items of expenditure needed to pay for the consumption for the replenishment of lost labor power naturally can and does vary regionally and nationally and according to individual and family needs. Each people or group maintains an historic standard of living often differing markedly since a worker may replenish his labor power by consuming meat, fish, wheat, milk, beer, and vegetables, etc., or by consuming beans, bananas, and water. Within certain limits the workers’ living standards can be driven lower and lower and yet suffice to replenish the lost labor power expended in the production process. The worker must be eternally vigilant to defend his historic standards.
Corporate profits can either be distributed as dividends, bonuses, and other payments, or may be ploughed back into the business either first accumulated as a hoard, or spent directly on re-investment. We should not let the production capitalists shift their costs on to the general public. Workers must continue to ensure the burden of taxation falls onto the wealthy classes and does not adversely affecting the workers’ cost of living.
Wages paid workers theoretically have to cover periods of no work funds have now also been established as a permanent compulsory savings fund for old age, disability. This fund, for the most part, again is collected by business companies as part of the cost of doing business, although here not only the employer but the employee is taxed as well. The employee is never trusted to pay the bulk of the tax; the employer does it for the worker as agent of the State.
But how can the worker be taxed if his pay covers only the bare minimum for his immediate expenses? The obvious answer is that the tax can be levied and collected because the worker has already received as wages a sum sufficient to cover this tax. What the employer has given with one hand he has been very careful to take immediately back again with the other hand as agent of the State. But why all this indirection? Would it not be simpler and better were the tax levied directly on the employer and no wages increased? Let us look at the reasons behind this indirect procedure.
In the first place, in most cases the relation between pay increases and taxation is not a simple mechanical one. The State does not decide to tax workers and then order their agents, the employers, to increase wages so as to enable the workers to pay these taxes. In most cases the workers have been able to force the wage increases first, due to favorable circumstances and struggle. It is possible for workers to increase their real wages because the economy of their country is strong and prosperous and stands in a monopolistic or imperialistic position in the world earning super-profits for employers. It is possible for workers to have strong and militant unions to threaten the employers with dire action unless wage increases are forthcoming. Employers may be attacked individually, not collectively, and in some cases may be too weak to stand the struggle of a powerful working force leveled against them. Now with such real pay increases the workers are able to pay the tax especially needed as a compulsory national insurance savings fund for old age security. At the same time their income is reduced and the power of the employer, especially as agent of the State, is reinforced.
Secondly, by first increasing the nominal pay to the worker and then taxing that increase away the State and capitalism give certain illusions to the worker: that he is the recipient of real wage raises and to some degree a property owner, and that as property owner he is like all other property owners paying taxes to a State that acts in his behalf. The State now is partly his State and he must eschew all thoughts that the State is his deadly enemy controlled only by enemy classes. He can be induced to take part in the large number of taxation struggles and make them a decisive part of his political activity, rather than concentrating on the employer.
Taxes levied directly on business would be considered part of overhead expenses and reduce net profits accordingly, other things being equal. Taxation on the payroll however, forcing an increase in the payroll to meet the charge of taxes, causes an increase in the cost of production upon which the average rate of profits is to be calculated, other things being equal. Such a tax thus may increase prices and profits. Taxation thus has a great influence on the price and profit structures. It must be said that the workers have not opposed these “transfer” taxes, in fact they demand a greater unemployment compensation tax on employers so that they can receive full pay for the entire period of their unemployment. It is different with taxes levied for social security and medicare. Here the working class wants the whole tax paid by the employers. Also the working class violently objects to the mass of fraud and corruption, the inefficiency and waste by which the tax funds are dissipated, with cheating employers and professionals ripping off billions of dollars annually and workers deprived of the adequate care they need and expect.
Some taxes are hidden in prices. Excise duty on fuel, alcohol and tobacco, for instance. Then there is VAT (or purchase tax or sales tax) on particular goods. This is the principle tax on consumers, levied through retailers on the consumer when sales are made. Here it is the merchant who is the agent of the State, who collects the tax and must turn it over to the authorities. If such a tax is on luxury, the working class is little concerned If the tax is on necessities which raise the cost of living, it is a blow at the sufficiency of the wage structure and the historic standard of living. This might bring protests on whose backs the regressive tax falls most heavily. The workers try to shift the burden of the sales tax on to the employer by securing compensation cost of living wage increases; but generally the cost of living rises first and the wage levels rise belatedly after. If the workers have developed a pay scale already higher than adequate to meet the costs of replenishing their labour power, then the sales tax is an act by the State to strip the workers down to that minimum level which the employers by themselves were not able to do. Again the State comes in to help the employer while a good part of the sales taxes goes for purposes to favour employers objectives.
Consumer taxes abound and large sections of the unemployed or poor cannot shift these consumer taxes on to the employer. They can only demand a belated relief by increases the in unemployment, sickness or pension benefits which can be won only with the help of the working class also adversely affected.
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