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John Passant

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April 2010



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Tax and the exploitative process

I was asked about whether the left should oppose new taxes because in reality the working class will bear them. An off the top of my head response was along the following lines. What do you think?

Let’s start from basics.

Labor creates value. Surplus value is taken from productive workers. Then that value is fought over by various actors – different branches of capital, the state and so on.

Tax is the state getting its cut of the surplus workers create. It can do this by taxing workers and bosses directly, or indirectly taxing workers’ consumption.

Say it taxes the bosses directly (eg through a carbon tax).  I have in mind the electricity generation industry. These bosses’ profits will go down, so they will try to make that up by increasing prices, and/or by increasing the rate of exploitation in the workplace (eg lengthening  the working day, increased productivity through extra work, job losses, speed ups and new technology etc).

There will be a range of factors which might hinder this – the type of market, regulators (including price regulators) and so on. Most important would be the strength of the working class in resisting increased exploitation and prices through for example forcing real price controls on the industry and winning increased wages to compensate for the increased price increases and defeating speed ups and job losses. But then the whole cycle starts again.

And then of course there is the question of what the state does with the tax. Rudd’s Carbon Pollution Reduction Scheme looks like it returns some of the tax to the polluters and some to the less well off.  

Socially useful expenditure (eg health and education) benefits both workers but only in the context of the bosses having a fit and educated workforce to exploit us better. So our slogan should be to tax them to pay for their benefits (although something rather more snappy than that.) 

None of this is to say we oppose a tax on the bosses. For a start there is the ideological victory of taxing the bosses.

There is also likely to be some lag between the hit to profit and the price increase (and the attacks on workers in the industry are likely to be a little lagged too.) And if workers do resist any attempt to pass the cost on to them, it trains them in fighting, and they could conceivably permanently reduce the share of surplus going to the bosses.

For a capital intensive industry like electricity generation it is not something you can easily pull out off once you have invested your billions, so they might be stuck long-term with lower profit rates.

The question of who bears the burden of new taxes is largely a question about the combativity of the working class and its willingness to fight attacks on it in the workplace and to fight for wage increases to counteract price hikes for necessities, like power in this case.



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Comment from Shane H
Time April 6, 2010 at 9:59 pm

Been thinking about this – and just happening to be listening to Mike Hudson – his comments seem relevent for eg

Comment from Arjay
Time April 6, 2010 at 10:04 pm

I was reading and article about one of our most prominent billionaires who owed the tax office 330 million in 1995.The Tax office settled for 60 million but with his political influence paid 25 million and Paul Keating gave him a position on the board of the RBA.

Can you confirm or deny these asserions John?

Comment from Ben Courtice
Time April 7, 2010 at 8:07 pm

Your comment that it is a “question about the combativity of the working class and its willingness to fight attacks” is important. Also, what type of carbon tax is important, what level it’s set at, what loopholes it may have etc — all these are crucial. And what does the government do with the revenue raised from the carbon tax — compensate poor households? Or buy new submarines? Or at least they could fund renewable energy with the money raised from the coal companies for example. The combativity of the working class is also relevant to all these, i.e. do workers actively fight for a carbon tax? And force some conditions on how it is imposed?

Comment from Marco
Time April 8, 2010 at 11:39 am

I tend to share your views on this matter, John.

Let’s face it: we’re stuck in a capitalist mode of production. This might change tomorrow or within 50 years, for all we know; but as true as hell is the reality today.

So, we need to fight with what is available now. And the truth is that taxes are vitally important for capitalists: it’s one of their means to remain profitable. And it works.

Look at this piece in the SMH today:

Gap widens for mega rich

One of the causes is “cuts to the top marginal tax rate which had given high income earners more scope to invest in property and financial markets”.

There are things in the article that are disputable (and I will be contacting the original authors with my concerns, as I am very interested in labour economics), but those related to the amount the rich are getting richer are indubitable.

And this leads me to some disturbing news. Have a look at this blog:

The Henry & Ergas Tax Reviews

If what this blogger says is true (and remember, this is just a blog), that would explain Rudd’s reluctance to make public the Henry tax review.

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