From: Jurriaan Bendien (adsl675281@TISCALI.NL)
Date: Wed Jan 09 2008 - 07:49:18 EST
Ian, I realise it is a bit rich to blame the demise of Marxism on the lack of a theory of taxation... I said more cautiously it "might help to explain". The substantive point is that no theory of capital accumulation is complete without a theory of capital finance and public finance. Marx does provide an outline of a theory of capital finance, but he does not work out its implications completely. He provided no theory of public finance. If total taxes constitute anywhere between 10% and 30% of the final unit-price of goods and services, any economic theory which simply ignores this fact cannot provide and adequate account of capital accumulation. In Marx's own time, the tax take represented only approximately 5-10% of national income, and the additions to commodity prices (generally in the form of tarriffs and customs duties) were generally small or non-existent. At that time, taxation was mainly property and income taxation; the techniques for implementing a universal goods and services tax did not exist, and typically wages were not taxed at all. Marx himself therefore considered that taxes were merely an arbitrary modification of commodity prices, somewhat obscuring the real value relations pertaining to the production and circulation of commodities. In reality, of course, tax imposts become part of the cost-structure of production and the cost-structure of commodities, and if tax rises to let's say 20% of commodity unit-prices, 25% of company income, and 25% of labour income, this has a very decisive impact on profitability and becomes a significant factor in value relations. Leftists often remark about how little tax corporations pay, but obviously corporations do effectively fund payroll tax, and anytime the tax on wages is reduced, they make more profit, because it lowers the total cost of employing labour. If central and local government collect taxes, these funds aren't simply stuck in a box. To the contrary, they are placed in bank accounts, where they earn interest prior to expenditure. The government furthermore extends contracts to private enterprise, in which case tax funds become a source of accumulation for private enterprise (the bourgeois classes would never have permitted tax revenue to rise to 30% or even 50% of GDP in some cases if they had not benefited greatly from this operation, through government contracts). In addition, the funds are a source of accumulation for government functionaries, and some government agencies are directly profit-making corporations of one stripe or another (SOE's and suchlike). It is true that, in aggregate, that state debts may sometimes not be proportional to revenues (a fiscal crisis), but that doesn't mean it does not make money in the meantime, or that it does not invest in activities which accumulate capital. As the lender of the last resort, the state can roll over debts in perpetuity, and just this simple fact already enables it to make profit on loans. If I own shares or stocks in a corporation, I have at least some say in corporate policy; it may in reality be negligible or non-existent, if the issue of shares is very great and I own only few, but at the very least if corporate policy is not to my liking, I can sell up my shares. The corporation is moreover obliged to provide an audited statement of its finances. But this is not the case with taxes. I only ever have one vote in elections, practically no influence on what the government does, public finance is obscure, yet I have to keep paying taxes anyway, regardless of what happens. Death and taxes, that sort of thing. Thus, the government is the only business in town which claims income and assets as a sort of "aristocratic entitlement", regardless of performance, and even regardless of whether it recognizably produces anything at all from which the working classes benefit. Whether my tax contributions are used to fund a public hospital, or whether it funds warplanes, is something I have no control over, i.e. I have no control over how the state redistributes funds to benefit different social classes and groups. Workers may complain that they are exploited by the surplus-value obtained by employers from their employment, but how about a business which claims part of your income or output, regardless of whatever you do or don't do, as of right, regardless of what the recipient does with the money, a business that is not even able to account properly for its own funds and explain how money was spent? For this reason, I am a bit skeptical of NGO leftists who harp about the "civic duty" of capitalists to pay their taxes rather than evade them. The argument of these people as tax beneficiaries sounds radical and progressive, and makes some sense, especially in less developed countries, insofar that if those who can pay taxes do not pay taxes, you obviously don't have the funds to develop the social and physical infrastructures which private enterprise is unwilling to invest in. But this is only one side of the equation, the other side concerns what governments actually do with tax funds. If what governments do with tax funds is drowned in vague waffle about "governance by stakeholders", and if no real "transparency" exists in the use of funds anyway, you can hardly blame people for trying to evade or avoid tax. After all, their money just disappears in a cosmic black hole. It is all very well to talk about "corruption" of state functionaries, but the problem there is that the corruption is typically defined in terms of a transgression of a law. If legal rules enable particular groups to enrich themselves at public expense, or if there is no relevant legal principle governing what they do, this however may in substance be criminal and corrupt, even although it is not illegal. Here of course government functionaries have the special advantage, that they both make the law and carry it out, permitting them to be a "law unto themselves". The rationale of taxes is that the state can provide goods, services and amenities which private enterprise cannot or will not provide, and provide them more efficiently and effectively, at a lower cost. If all provide small amounts to a fund, a large fund is created which can finance expenditure from which all benefit according to need, and which they could not finance on their own. That is, if people co-operate rather than compete, a better result is obtained for all. But often the actual application of this strategy is a far cry from the mutualist principle which underpins it. Although taxation is largely ignored in the Marxist literature (especially by theorists of "state capitalism"), it is in reality an issue at the very centre of political economy. David Ricardo titled his 1817 treatise "Principles of Political Economy and Taxation", and indeed the science of political economy arose out of "political arithmetick" concerned with the collection and distribution of the tax burden and the conditions for fair trade. It is precisely in the theory and analysis of taxation, that the bourgeois society acknowledges its social nature, and articulates what notions of morality & fairness will actually apply, counted out in dollars and cents. Jurriaan
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