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 burden of taxation is borne by the capitalist class, that the whole question has become a misleading, dangerous red herring diverting 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 dernise 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 arnount 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 terned "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 acknowlodged legalized killer, with a potential for worldwide destruction.
For the capitalist class taxation is a never-ending dilemma, an irrernovable 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 up on 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. Governrnental 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 expectcd 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 mindboggliing. 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 muintain 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 is a futile waste of time - a mythical non-issue. There is, in fact, only one issue -the establishment of socialism.