The Marxist view on tax

In the past I’ve noted problems with slogans like “Tax the Rich” and posted some stuff on how taxation fits into a capitalist economic framework.  Below is a very good piece on tax from the latest issue of the Socialist Democracy Bulletin.  The bulletin also contains interesting material on the gas-and-water socialists’ political strategy, both its parliamentary cretinism and its tailing of the union bureaucracy, the split between the Socialist Party and Clare Daly, the moralistic pursuit of Mick Wallace, the problems of reformism and much else.  The entire bulletin can be found here.

The upheaval in the United Left Alliance over the revelations of tax avoidance by former businessman and independent TD Mick Wallace highlights the degree to which the left in Ireland has become almost completely defined by the issue of taxation.

The current programme of ULA can be boiled down to two major planks centred on taxation. Firstly, that the economic crisis (low growth, debt, unemployment etc.) can be overcome through increased taxation on the wealthy and higher public spending. And secondly, that opposition to austerity can be mobilised most effectively through the anti-household charge campaign. It is because taxation has been elevated to a strategic level by the ULA that even the most tenuous connection with evasion provokes a crisis.

However, the fundamental problem with a programme based almost exclusively on taxation is not that it exposes a political movement to charges of hypocrisy, but that it cannot produce a resolution to the economic crisis that is favourable to workers. In purely quantitative terms, proposals to bring resources hoarded by capitalists into use through government tax and spend policies (such as the ULA’s wealth tax and job creation programme) have a rational appeal. The problem is that they ignore the profit-driven dynamic of economic activity within capitalism and the role of the state in defending class rule. Effectively what the left is doing is calling on the capitalist state to act against the interests of the capitalist class on behalf of the working class. While it is true that workers have won social advances within capitalism these have come through struggle rather than persuasion.

In general the state will engage in tax and spend only to the degree that it supports the continuation of capitalism. So it will fund public services in order to maintain a supply of healthy and skilled labour; and also the military and police forces that are the ultimate guarantors of capitalist rule. But because it seeks to do this in a way that minimises the cost to the capitalist class the burden of taxation inevitably falls on workers. This is why growing state intervention in the economy is always accompanied by higher taxes (often in the form of indirect charges) on labour.

Despite free market ideology, taxation and state spending is not an anathema to capitalism. Indeed, it has been a key element in capitalist development. Throughout history there have been many examples of state intervention in the economy. This has never more obvious than today when states around the world have intervened to shore up the financial sector. Some, such as Ireland, are so committed that they have taken themselves to the point of bankruptcy.

Over the past four years the Irish state, in terms of spending and ownership of assets, has expanded enormously. Yet this has been a nightmare for Irish workers who have borne the burden of that expansion. There is certainly nothing progressive about taxation and state spending which transfers wealth from labour to capital. But neither is there anything progressive about transferring income from one section of the working class to another. Indeed, one of its consequences has been to lay the basis for the type of right wing politics (which has been most effectively propagated by the Murdoch media) that directs the resentment of workers towards the poorest in society (welfare claimants, immigrants etc).

In the public mind socialism is often identified with high taxes and state spending. This is due in some part to the programmes now being put forward by left formations such as the ULA. But largely it is the legacy of a long history of social democracy and labourism (and later Stalinism), which held that the state could be used to introduce socialism or at least eliminate the worst excesses of capitalism. However, after one hundred years of state expansion such a proposition appears more threadbare than ever.

This reformist approach stands in sharp contrast to the revolutionary position of Marx and Engels. For them no amount of taxation or state spending could change the fundamental structure of capitalism. This is why taxation did not assume great importance in their work, and when it did appear was usually as a means to expose how workers were being ripped off by the state. They also recognised the danger that dependency on the state could sap the revolutionary potential of the working class. This is why some of the positions taken by Marx and Engels, such as their endorsement of the “those who don’t work don’t eat” principal, can appear harsh. These stem from the conviction that socialism could only be achieved through the self-reliance and self-organisation of the working class, and that only through struggle could workers fit themselves to be the rulers in a post capitalist society. This was firmly rooted in a perspective for revolution. It is one that retains relevance for today.

Further reading: I’ve written about tax on the NZ-based site I’m involved in, Redline.  It’s relevant to Ireland, north and south, although in NZ value-added tax (VAT) is called GST (goods and services tax).  Anyway, the article is here.


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Posted on October 12, 2012, in 21st century republicanism and socialism, Anti-household tax, Economy and workers' resistance, Irish politics today, Political education and theory, Social conditions, Toadyism, Trade unions, twenty-six counties. Bookmark the permalink. 6 Comments.

  1. On a formal level you are right. Personally I think the left has fallen for a “progressive” capitalism in one country. A EU wide stimulus, a sort of internal Marshall plan, makes sense.
    But you neglect the role of demands that make sense to ordinary people. The refusal of the government to even consider a higher rate of income tax does more to wake people up to the essential nature of the system than the most erudite marxist pamphlets on class society.
    The household tax again is totally non progressive even comp[ared to income tax. There is a battle line there. Battle lines are where you find them not necessarily where you want them.
    You could end upm quite doctrinaire like I think DeLeon who thought that demands for wage increases were meaningless as inflation wiped oput the gains over time. That only an end of capitalism should be called for. Apologies to the alte DeLeon, it could be the SPGB.
    The tax issue is important as everyone sees what Wallace has done is typical of the comprador and parisitic bourgeoisie we have.It was a weapon to the right on the lines of Sure wouldn’t we all do it if we had the chance”. Coalitionism can be small scale with alliances with Wallace and say Shane Ross.
    We need to reach out to people who are not readey for a revolution. “No solution but revolution” makes for a sound bite but is hardly enough.
    As for the ULA, close to being dead.

  2. I agree with you in opposing regressive taxation like the household tax.

    However, I have a major problem with your argument about “the role of demands that make sense to oridnary people”. Sometimes these are good ideas and sometimes they are not.

    The problem with demanding higher tax in an economic crisis is that, while the left tells people it is a *partial solution*, the reality is that it would *intensify the crisis*. The left can’t operate by duping people – suggesting something is some sort of solution when its impact is the opposite. (I’m all in favour of itne nsifying the crisis, but not while telling people that such measures will help them!)

    The idea of transitional demands is that they are demands that relate to today’s consciousness *but point clearly beyond capitalism*. Confusing people with demands for higher tax doesn’t do that – it points in the opposite direction.

    The task is to find ways – and I’m not suggesting it is easy and nor do I have a blueprint for Ireland from the safety of my swivel chair on the other side of the world! – to connect to today’s consciousness while not succumbing to it, but actually developing it *in a revolutionary direction*. Part of that is explaining that *there are no solutions* for workers within the confines of capitalism. Unfortunately, a lot of the left seek easy ways out by, for instance, offering up Keynesian economics as a partial, or short-term ‘solution’, so the goal of socialism is never really on the agenda.

    One of the ironies of this is that, having criticised Stalinist two-stage approaches for so long, so many of the Trotskyists now have their own two-stage approach: Keynesianism today, Marxism tomorrow. And, just like the old Stalinist two-stagism, it’s always *today* and socialism is always *tomorrow*.

    It’s interesting that the ULA is close to being dead. I’ve never covered it on this blog. There are two reasons for this: one is that it’s gas-and-water socialism of the kind that Connolly critiqued a hundred years ago and simply can’t be taken seriously as any sort of revolutionary politics and, secondly, knowing who was involved (SWP/SP) it was clearly never going to go anywhere because those groups would put their own sect needs first.

    The more I see of what is going on, the more convinced I am of the merits of eirigi.


  3. “The problem with demanding higher tax in an economic crisis is that, while the left tells people it is a *partial solution*, the reality is that it would *intensify the crisis*.
    The demand is actually that the rich pay more. A return to a progressive income tax. as Marx wrong. Surely this makes it clear that the crisis is being solved at the expense of the poor.The social gains of post WW2 are being roled back. In fact I think NZ was a forerunner of what is happening in the EU.
    Eirigi are indeed interesting.The Healys are talking of doing something.
    Sinn Fein now reformist and I gather defending the Quinns.Though seen as an alternative. There is a concerted campaign to rehabilitate FF. They don’t quite trust SF yet.

  4. And if the demand that the rich pay more succeeded, it would intensify the crisis.

    Marx pointed out, as far back as The Grundrisse, that ‘the single most important law of modern political economy’ is the law of the tendency of the rate of profit to fall. (I continue to have to keep citing this, so I know by heart where it is – in my Penguin edition of The Grundrisse it’s on p571!) Once the TRPF sets in sufficient to cause a crisis, any intensified deductions from surplus-value will *intensify* the crisis.

    But sections of the left continue to argue for taxing the rich more as a *solution* or at least *partial solution* to crisis. So, imagine the result if the masses lined up behind this demand, won it and then the crisis got more intense. They wouldn’t keep following the left, would they?

    One of the reasons the Keynesians lost out to the Chicago School in the later 1970s/1980s was because high-tax regimes simply intensifed economic stagnation. The monetarists, neo-liberals and so on could point to *an actual fact*, and that Keynesian theory hadn’t believed/foreseen that you could have inflation and stagnation at the same time (stagflation).

    (Basically, all that happens if you use higher tax in an economic crisis is that the capitlaists have even less to invest in a new round of capital accumulation, so unemployment rises and stagnation intensifies while, at the same time, more money is being put into the economy by the state and, because production isn’t expanded, prices on existing goods and services go up to soak up the extra money circulating. This is precisely what happened when Keynesian ‘solutions’, in the form of stimulating demand-side, were used in the 1970s. Sadly, a lot of the left hasn’t learnt much from its last disastrous performance in the midst of a massive capitalist economic crisis.)

    The role of revolutionaries has to be to explain that there are no solutions for workers within the confines of capitalism and to offer an alternative way forward. In the context of capitalist crisis, the debate at present is largely dominated by different forms of capitalist ‘solution’ – more regulation and tax or less regulation and tax. All these do is produce different forms of worsening the position of workers, leaving workers demoralised and confused.

    I know it’s very hard, but we have to offer an alternative way of organising society, not an alternative form of taxation that will simply produce an alternative form of intensified crisis.


  5. But the Manifesto calls for a progressive income tax. Surely using this to point out that the crisis is being solved at the expense of the poor is common sense.The bold DeLeon made similar arguments to you.Getting people to make the leap in one step to a socialist conciousness is something fairly wide

    • Five points:

      1. The Manifesto wasn’t talking about a demand on a capitalist government, let alone one in the midst of a capitalist economic crisis; it was talking about what would be done by a revolutionary government.

      2. The Manifesto was 1848. Marx hadn’t even begun his serious economic studies. You’d need to indicate where, *after he had produced Capital*, he put this forward as a demand on a capitalist government in a crisis.

      3. It’s possible to point out that the capitalists are trying to make the working class pay without confusing workers about the tax issue. Like I’ve said before, higher taxes on capitalists in a crisis intensify the crisis, but the left tells people this measure will help solve the crisis. So the left ends up miseducating workers.

      4. A way to educate people on the tax issue would be to demand the abolition of VAT, since you can then point out that VAT paid by workers on consumption goods is a deduction not from surplus-value, like PAYE tax usually is, but is a deduction from the actual money equivalent of labour-power (ie the wage).

      5. Shouldn’t Marxists be giving workers Marxism rather than Keynesianism?



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