Taxes—and the Crisis of Capitalism

maketherichpay

maketherichpayThe week of March 4 was historic for Wall Street. The Dow Jones Industrial Average broke its all-time record high on Tuesday, and continued to break that record throughout the week. Friday brought with it the monthly jobs report. Initial estimates are that 236,000 new jobs were added in February, somewhat higher than the 160,000 predicted by most economists. 

Official unemployment currently stands at 7.7 percent, two-tenths of a percentage less than January, and the lowest since December 2008. In addition, there are an estimated 4 million job vacancies. On the surface, this would seem to indicate that the economy is growing faster than the work force. Millions of hopeful unemployed workers are getting job interviews to fill these vacancies. Many of them have even landed several interviews—often from the same employer for the same job.

The average job vacancy remains unfilled for an estimated 23 business days today, compared to 15 business days in 2009. In other words, it is taking longer to fill positions than at the height of the crisis. How is this possible? The explanation is simple. As there is growing uncertainty as to how long this “recovery” will last, there is an unwillingness to follow through on filling these vacancies. John Sullivan, a management professor at San Francisco State University, explained that the mood of the bosses regarding new hires was that of “fear that the economy is going to go down again.” There is good reason for this fear.

With the widespread cuts that automatically set in last month, there is a very grim prospect ahead. “Unfortunately, the heavy-handed budget cuts forced by the sequester threaten serious harm to our economy and to our nation’s long-term unemployed workers,” said Christine Owens of the National Employment Law Project. It is estimated that the federal cuts will lead to the immediate loss of 750,000 jobs, with millions of other jobs “at risk.”

We see record profits for big business, alongside continued “tightening of the belt” for the working class, as well as the biggest federal budget crisis to date. Europe is on the precipice of financial meltdown, and two of the world’s biggest economies, China and Germany, seem to be stagnating. India, Brazil, and Russia are also experiencing slowdowns. There are rough seas ahead and we may well be heading toward a period similar to that of 1937–38—“part two” of the Great Depression. All this while corporate America sits on trillions of dollars in cash.

To many, the answer seems simple: tax the rich! It is suggested that a higher tax rate on the wealthiest Americans could facilitate a redistribution of wealth, providing the working class with more cash to spend, and thereby invigorating the economy. This Keynesian measure would supposedly stimulate the economy and get people “back to work” through support for small businesses to expand their operations. The “tax the rich” slogan has been embraced by many as it seems very practical and realistic. It is even endorsed in varying degrees by the likes of President Obama and Warren Buffett, one of the richest people in the world.

In the mid-1940s the federal income taxation rate was 91 percent for the top income bracket, and as recently as 1980, the taxation rate for the top bracket was 70 percent. Today it stands at just 39.6%. It seems a no-brainer that a return to the previous tax rates will bring about a return to the “golden age” of postwar capitalism.

However, even with these rates, there is a plethora of ways for the richest individuals to avoid paying taxes, and you can bet they hire the best accountants to help them take full advantage of every loophole that exists. If the laws change, there is no reason to assume they wouldn’t find new and more creative ways to conceal their real income.

Corporations have also been getting quite a break. Citizens for Tax Justice and the Institute on Taxation and Economic Policy reported that between 2008 and 2010, the average tax rate for 280 profitable Fortune 500 companies was just 18.5 percent. In that same period, 30 of those companies paid nothing at all, receiving a refund instead. 78 others got off tax free at least one of those years. If there was any doubt about legal loopholes in the tax code this should be proof.

If these loopholes were removed and the tax laws tightened for U.S.-based corporations, one can assume they would have no problem packing their bags and taking their companies elsewhere—to countries with tax laws more suitable to their needs. The limitations of the “tax the rich” slogan are exposed even from the point of view of bourgeois economics.

Nonetheless, the call to tax the rich is a healthy reaction against rampant inequality. But the task of the Marxists is to raise the workers’ horizons beyond the immediate demands. Big business argues that they need tax breaks to encourage “job creation.” But the capitalist system doesn’t function to fulfill needs or to employ workers; its primary object is profit. The crisis facing the capitalist system today is one of overproduction—there have been too many commodities produced than can be sold at a profit on the market. There is absolutely no incentive to invest in further production while this situation remains. And every measure taken within the context of capitalism only adds fuel to the fire.

What is puzzling is those on the left who uncritically put forward the “tax the rich” slogan—even those who describe themselves as Marxists. “Tax the rich” is presented as a solution to the crisis, and therefore accepts the continuation of the system. But this crisis is not merely a temporary “bump in the road” or an aberration, but flows naturally from the internal contradictions inherent in the capitalist system itself.

There are those who justify this demand by pointing to the Communist Manifesto, whose 10 demands include “a heavy progressive or graduated income tax.” But this is just one of 10 demands put forward by Marx and Engels. Others include:

“Extension of factories and instruments of production owned by the State; the bringing into cultivation of waste-lands, and the improvement of the soil generally in accordance with a common plan. Abolition of property in land and application of all rents of land to public purposes. Centralization of credit in the hands of the state, by means of a national bank with State capital and an exclusive monopoly.”

Marx and Engels were not merely demanding an adjustment of the tax code, but the complete transformation of society. Any demand taken in isolation is stripped of its true meaning. Of course, we cannot arbitrarily parrot demands raised by the communist movement in the 1800s. Conditions can and do change, even though the fundamental contradictions of the system remain.

What we must do is apply the method of Marx and Engels when working out demands. We must build a bridge between the immediate needs and consciousness of the working class, and the need for the socialist transformation of society. Leon Trotsky, one of the leaders of the Russian Revolution, described this as a transitional demand—a bridge from the minimum program (basic and immediate demands that can be achieved under capitalism) to the maximum program (demands that would constitute the abolition of capitalism in themselves).

Our demand is: “make the rich pay for their crisis!” This does not preclude taxation of the rich—we are certainly in favor of a heavily progressive tax code—but that is not enough. For example, we may also make the rich pay by trying them and putting them in jail for fraud and swindling. But above all, we must get to the heart of the matter: private ownership of the means of production. Only by nationalizing the key levers of the economy under the democratic control and planning of the working class can we expect to put an end to the lunacy of the capitalist market.

Nicholas Bloom, Economics Professor at Stanford University, said of the current crisis, “it’s like one of those horror movies, an economic Friday the 13th, where this recession never seems to die.”

Karl Marx himself was fond of using vampires and werewolves as examples to illustrate how vicious and monstrous capitalism is. In order to vanquish the horrors of the capitalist system, we need to look no further than the writings of Karl Marx—writings which are startlingly relevant to the prevailing conditions today.

 


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