Re: (OPE-L) taxation and public finance in Marxian literature

From: Jurriaan Bendien (andromeda246@HETNET.NL)
Date: Wed May 19 2004 - 15:54:46 EDT


On Laffer, what I had to read as student was:

Gardner, Martin, "The Laffer curve and other laughs in current economics",
Scientific American, December, 1981.


In addition, Edward Nell is sharp on these issues:

Nell. Edward J.(ed.): _Free Market Conservatism, Allen and Unwin, 1984.

As regards taxation policy, the main criteria are usually:

- practical ability to collect a tax

- cost of tax collection

- efficiency and effectiveness of tax collection

- actual ability of the population to pay tax, and their self-interest

- economic effect of the magnitude and distribution of the tax burden

- fairness and justice in de taxation system as a whole

- collective interest in the collection and expenditure of tax funds

Both income taxes and consumption taxes (or indirect taxes) can be
progressive or regressive, since the tax rate on consumption can be varied
according to the type of goods and services bought. A universal sales tax is
normally a heavier burden on the working class, simply because they have a
smaller income and budget. But you can tax sales of expensive durables and
assets at a different rate. Marx's objection to a a VAT-type tax was that
(1) it glossed over differences in social class position and (2) separated
tax collection from the control over the spending of tax funds, i.e. taxes
would be no longer earmarked for a specific purpose, administered by a
specific authority and under control of taxpayers who give a specific
mandate for expenditure of specific tax funds. The second point is probably
more politically significant these days than the first, namely money gets
spent for things that taxpayers gave no mandate for, and have no control
over.

On the one side, taxpayers nowadays have less control over how their taxes
are spent, than if they buy stocks & shares (and they can sell off their
stocks to recoup at least part of their money). That is the neoliberal
criticism; they should buy stocks, not pay taxes.

On the other side, accountability in the public service is usually much
greater, since there can be much fewer "business secrets" than in
corporations, and public servants are governed in their actions by legal
rules and obligations to report to a public which has a legal right to
access to government information.

Taxation was one of the key sources of controversy in the bourgeois
revolutions in Europe, and one of the cornerstones of the "social contract"
whereby the government accepted certain obligations to citizens and secured
citizen's rights. Quite simply, taxes were necessary to implement
obligations and rights. Hence the saying, "one thing is certain, death and
taxes", because civil society requires some kind of social contract, and to
fund that social contract requires taxes.

Anwar Shaikh is correct to say that US workers in total got from government
more or less exactly what they paid in, so there was no real "social wage"
in that sense, in the sense of an additional pay-out from government. But
nevertheless social security funds were redistributed among workers; those
who had accidents, had no job, etc. could claim a benefit for which other
workers helped to pay.

It is all very well to deride the social democrats, but (1) social security
benefits are essential to many workers, and in a socialist society you still
need a social contract and means to fund it, that means in practice some tax
or other anyhow, even although you might be able to reduce the scope of
taxation, (2) in the case of the USA, it never had a real social democracy
in the first place, and therefore the demand for a social security system
geared to meet the needs of the working class is actually pretty radical,
and it's something that can be won and defended, which is a tangible gain,
(3) socialists wish the expenditure of tax funds to be carried out with an
appropriate mandate, so that money paid in is spent for those purposes for
which it was intended, and not something else. Originally in the history of
bourgeois society, there were many different taxation authorities mandated
to collect and spend taxes, and gradually these were centralised. In the
process, the tax burden shifted to wage and salary earners (easier to tax
through PAYE), and control over tax spending was lost more and more.

The objection to this type of argument is that it's all just reformism, but
no revolutionary movement ever gained ground other than through a direct
struggle for social reforms benefiting the working classes and working
farmers. If leftwing politicians have no tangible social alternatives to
offer than a free lifestyle and overthrowing the government, it doesn't get
much of a hearing, because people want to see real effect and tangible gains
in their own lives. The most basic expression of depoliticisation is that
people do not care anymore how their tax money is spent or feel they have no
control over it anymore, even if the tax money spent is very large. If you
can explain that people have an immediate material stake in how tax funds
are collected and spent, then you also generate more interest in a public
politics which goes beyond lifestylism.

There is a large economic literature on taxation, mainly under the rubric of
public finance. But a lot of that literature is devoted to how businesses
can minimise tax through tax avoidance and tax evasion.

Taking a working class position on taxes is very simple really: it concerns
what the costs are, in relation to the benefits to the working class, and
this reflects the rights and obligations of the social contract. And then
the question is one of minimising the costs, maximising the benefits, and
ensuring good control over how tax money is spent. If that is not possible
to any extent, then no social contract is possible either, yet civil society
requires such a social contract. In that case, all that one can do is
exactly what employers and the rich do, namely avoid or evade taxes. But
that can work only if the working class is capable of doing it, of asserting
its own alternative socio-cultural norms, and ensure that basic
infrastructure actually continues to work well.

Jurriaan
















----- Original Message -----
From: "Anders Ekeland" <anders.ekeland@ONLINE.NO>
To: <OPE-L@SUS.CSUCHICO.EDU>
Sent: Wednesday, May 19, 2004 4:45 PM
Subject: Re: [OPE-L] (OPE-L) taxation and public finance in Marxian
literature


> I'll think that 95% taxation will not happen. If the majority of people
see
> the very high incomes as fundamentally illegitimate, then we will have a
> radical reorganisation of society, change of property relations etc.
>
> But I would like to introduce another issue, the bureaucratic and
political
> down-sides of progressive taxes.
>
>
> At 22:16 15.05.2004, Paul Cockshott wrote about progressive taxes:
>
> >In this sense European social democracy has already incorporated many
> >communist principles.
>
> One might discuss if progressive taxes is a communist principle, in any
> case it is one of the important slogans of the Manifesto that the soc.dems
> have implemented to a certain degree.
>
> And I think that it certainly was a good slogan. BUT, we must not loose
> sight of the fact that the world has changed since then. By not changing
> fundamentally the property relations and the income structure connected
> with them, the soc.dems avoided attacking the distribution of income
> generated by the market directly. This in my opinion had negative
> consequences for the struggle for ideological hegemony.
>
> The soc.dems kind of accepted the efficiency of the marked, but wanted to
> correct a bit the income distribution it generated.
>
> I do not at all believe the that taxes creates "inefficiencies" in the
> economy, there is a real problem that Progressive taxes creates  a not
> enormous, but significant bureaucracy. It also turns wage-earners
attention
> to all the nitty-gritty details of the tax system. That is how to avoid
taxes.
>
> It also is a problem that the middle-classes are "hit" by progressive
taxes
> that comes in at certain thresholds, creating some bizarre effects of
small
> pay-rises in that area. But the major problem being that they are
> constantly outdated so that everybody pays them = no progressive
> effect.  (If you set them too high - no real effect - to few very rich
> people that are not able to conceal their income. "You pay as much tax as
> you think is politically correct", is the thinking in those circles, if
one
> is to believe the pink press)
>
> To what extent the taxes are progressive f.ex in Norway is really a
debate.
> There are signs that with all the loop-holes, different and complicated
> rules (accumulated over time to stop tax fraud) the system is not very
> progressive, it is just complicated.
>
> The property tax has a problem in Norway with poor/ordinary people owning
> valuable houses (inherited) but have small incomes, they are the
> foot-soldiers for the right wing attacks on property and fortune taxes in
> general.
>
> I have started thinking that in maybe a non-refundable transaction tax
> would be better, instead of the refundable VAT that is a major source of
> tax income in Norway today. This VAT - is only paid by persons. The
> refunding system creates a lot of paper and control mechanism. And since
> the percentage is 24% - it is always tempting to "strike a deal" with the
> plumber, the electrician etc.  - it encourages the growth of a black
> economy - also among working people. Tax cheating becomes a legitimized,
> becomes a routine.
>
> A non-refundable tax of f.ex 5% would tax would be much simpler, it might
> attack some of the of wasteful activities in the wholesale and retail
> trade. It would make consumption more expensive, as opposed to non-marked
> oriented, voluntary activities.
>
> In a country like Norway it is the "masses" that have to pay the taxes
> anyhow since a large part of consumption is publicly organised. This being
> the case - a simple, non-bureaucratic system is clearly to be preferred. A
> system that also makes the firms pay out of their profits.
>
> When "people" complained that a transaction/sales tax would not be
> progressive, the left could just say that the real problem is the unjust
> remunerations of different types of work in the market place. That could
> strengthen the support for the TUC's efforts to raise the wages of the
> lowest paid - and make people more critical of capitalism as a system. In
> short,  it could be politically be more productive to spell clearly out
> that we dislike the income differences, instead of using such a blunt and
> bureaucratic weapon as progressive taxes.
>
> It is a problem for the left of the situation that the right-wing populist
> party gets a lot of votes among the core of industrial and/or unionized
> workers for their opposition to the *complicated* tax system. Although the
> full digitalization has made the actual filling out of the forms very easy
> for most of us. The rich still uses a tax-lawyer to find the loop-holes.
> The only tax they really pay today is the VAT (often not even that since
> they have part of their private consumption through their firms!) - and
the
> fees (water, garbage etc.).
>
> Is there any radical literature on tax-systems?
>
> Anders Ekeland


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