Osborne announced plans to send every tax-payer a personal annual statement detailing how much tax they pay to central government and exactly where it goes. This is propaganda designed to get us all to think that because we are tax-payers, capitalists and workers, have a common interest. It's just the usual mystifying bourgeois nonsense. The SPGB argue that taxation issues are primarily a matter of debate between different sections of the capitalist class in so far as in the long run it is they as a whole who pay them rather than the working class as a whole. Most taxes in Britain are not even paid by workers but are collected and paid by businesses. Obviously, this is the case with corporation tax. It is also the case with income tax on wages and salaries, which is deducted by employers from nominal wages under the PAYE system and never even get into the hands of bank accounts of employees (income tax and family credit, in fact, is mainly a means of ensuring that workers without families don't get that part of wages meant for raising a family). Employer usually understand who pays the tax bill every month - and it's not the workers. It even comes out of a separate account, at a separate time, from the wage bill. To the employer, it is two different bills, one to the workers, and the other to HM Revenue and Customs. How the capitalist class, via its state, arranges taxes and subsidies is not a matter for the working class to get involved in. What's important to us is after-tax take-home pay.
The SPGB does not say that workers don't pay taxes. That would be silly. Many years ago a speaker for the SPGB stood up on an outdoor platform and declared, in answer to a question from the audience, that "the working-class doesn't pay taxes". This was clearly misleading as workers' can see that taxes have been "deducted" from their wage slips. We don't deny that workers pay, in the sense of themselves handing over the money, some taxes. Our argument is that the burden of taxation ultimately falls upon the propertied class and profits.
By burden we mean this. Wages and salaries (not some theoretical gross, but what is actually received, what the employer invests as variable capital ) corresponds more or less to the cost of maintaining and reproducing the working skills which employees sell to employers. During their working hours employees perform surplus labour, they create surplus value which belongs to the employer. The upkeep of the state and its machinery of government ultimately fall on surplus value, or incomes derived from surplus value, through taxation. Furthermore, it is in the interest of the ruling class to maintain the state apparatus because it maintains their dominant social position - though of course that doesn't stop them complaining about the cost and demanding cuts in its running charges. Rises in tax (direct and indirect), by increasing the cost of maintaining employees and their skills, are generally passed on, through the operation of market forces, to employers in the form of increased wages and salaries. This is based on the assumption that in the medium term workers sell their ability to work at its cost of production (or what Marx called its value), i.e. at the cost of what they must buy to keep their skills up to scratch and also to raise a family to take their place on the labour market when they retire. It follows from this that any permanent increase in the workers' cost of living, whether from taxes or from higher prices will be passed on to employers as higher money wages and salaries (On the other hand, any permanent decrease in their cost of living, as from rent control or from subsidies to food or transport, will end up being a subsidy to employers in the form of lower than otherwise money wages.)
However, this process is not automatic or inevitable; workers have to struggle for higher wages and salaries. Workers need to be concerned with what we get to take home in our pay packet, irrespective of the notional gross amounts shown. This passing on of costs from workers to employers will only happen if workers actively struggle for it and successfully achieve it. It doesn't just happen automatically. And there may be a time lag in the process. The capitalists will resist it, and sometimes workers haven't achieved, leaving them forced to survive on less than the standard means necessary for their (and their family's) reproduction, forcing them (or their spouse or children) to obtain another job, or find another way of securing the means necessary for their reproduction. And on the reverse of the process (decrease in cost of living due to subsidies, deflation, etc.), again, this is dependent on the class struggle; it doesn't just happen automatically, without a fight. However, it is true that in the long run in the day-to-day class struggle as what we get to take home depends on our collective strength from time to time to offset reductions in pay resulting from tax changes or increases in prices as an initial result of some tax change. Workers cannot ignore tax changes that reduce our material standard of living and these should be viewed in the same way as any other direct reduction in our wages or any other increase in the cost of living from any other cause and resisted accordingly.
As to the un-waged, since they depend tor their income mainly on handouts from the state, taxing them does not make much sense from a capitalist point of view - its just taking back part of what's been handed out, so why hand it out in the first place? This is why the government will he introducing so-called "tax credits", under which what is to be paid as tax (if anything) is to be set against what is to be paid as benefit and only the difference paid. So, as with PAYE, the poor will never see the taxes they "pay". Forcing the poor to physically pay a tax like the poll tax doesn't make sense either as the level of income support (formerly supplementary benefit, formerly national assistance, formerly the poor law) is fixed as the minimum supportable level which in theory can't be reduced further."
Perhaps less obviously, this also applies to VAT. It too falls on and is collected by businesses. As its name implies it is a tax on "value added" which, in capitalist economics, translates into a business's wages bill plus its profits. As we have just seen, wages in the medium term represent the cost of production of labour power, so though the amount of VAT payable is calculated on the amount of "value added" in fact just like corporation tax it only comes out of profits. Firms can't automatically increase their prices by the amount of the tax; they reduce their profits by it.
Excise duties on beer, spirits and tobacco are also paid out of their profits by the firms involved. Only in this case prices are raised. The government in effect creates an artificial monopoly position allowing monopoly prices to be charged - and then taxes away the monopoly profits for its own benefit. Insofar as these goods, selling at their monopoly prices, enter into the general cost of living of the working class they are reflected in higher wage levels.
The taxes workers actually pay out of their own pockets are such things as car licences, TV licences and, if they are owner occupiers, council tax - but, once again, in so far as these enter into the general cost of living they are reflected in wage levels. As regards the poll tax, the Thatcher government clearly made a major blunder in imposing a tax which had to be physically paid by every adult. Not only was this not cost-effective in capitalist terms (the extra costs of collecting it) but it led to resentment amongst those who had never paid such taxes and in many cases couldn't afford to anyway. In the end a combination of non-payment, riots, demonstrations and the loss of votes in by-elections, caused the government to back down and restore something akin to the old system under which only owner-occupiers paid local taxes.
If you are confused go and talk to employers and ask the following questions,
1) If income tax (eg at 25%) was abolished by the government, do you agree that this would in effect be a 25% wage increase for your workers?
2) If so, do you agree that it impacts on your profits to pay your workers 25% more than necessary?
3) As a result of this, and other things being equal, would you expect wages across the sector to fall on average by 25%, due to the action of general market forces?
The employer will answer YES, YES and YES. While employers tend to bear the cost of tax hikes, they also reap the benefits of tax cuts.
When we say is that in the end taxation is not a burden on the working class we are in good company. The economist David Ricardo wrote in the opening paragraph of chapter 16 on "Taxes on Wages" in "On the Principles of Political Economy and Taxation" that was first published in 1817.
"Taxes on wages will raise wages, and therefore will diminish the rate of the profits of stock. We have already seen that a tax on necessaries will raise their prices, and will be followed by a rise of wages. The only difference between a tax on necessaries, and a tax on wages is, that the former will necessarily be accompanied by a rise in the price of necessaries, but the latter will not; towards a tax on wages, consequently, neither the stock-holder, the landlord, nor any other class but the employers of labour will contribute. A tax on wages is wholly a tax on profits, a tax on necessaries is partly a tax on profits, and partly a tax on rich consumers. The ultimate effects which will result from such taxes then, are precisely the same as those which result from a direct tax on profits."
The actual mechanism whereby a tax on wages leads to a rise in wages is not explained by Ricardo but the Russian Bolshevik Alexander Bogdanoff did in his textbook "A Short Course of Economic Science" widely used as a textbook within the working class movement and the SPGB:
"It would seem that the description of indirect taxation given above contradicts what has been said with regard to the source of taxes being surplus value. For indirect taxes which are usually imposed upon articles of common use are passed on to the consumers, who in idealistically developed capitalist society are predominantly the workers. Hence the taxes are taken from the income of the workers, i.e., from wages. But this is an apparent contradiction, for the introduction of indirect taxes causes a reduction of real wages below the standard of the value of the labour power, and this, as has been explained, inevitably causes a rise in money wages at the expense of the surplus value of the capitalist."
He went on to explain the mechanism by which this happened:
"It is only in the last resort that indirect taxes are taken from surplus value in capitalist countries. At their first introduction they increase the mass of surplus value at the expense of wages. This means an increase in the rate of exploitation on a social scale, and consequently (other things being equal) the absolute deterioration of the position of the working class. We said above that the workers' share of the social product cannot be less than a certain minimum, that is, the value of their necessary means of existence. It does not follow, however, that immediately indirect taxes reduce wages below this minimum that the latter automatically rise. On the contrary, they rise only after severe class struggles -- strikes, &c -- and the workers frequently have to exert considerable effort in order to restore the previous standard of existence, which sometimes takes a long period to achieve."
It is what we say workers should always do - press for the highest wages that the labour market will bear.
We don't treat all wages as "subsistence wages". If we did, we would have severe difficulty explaining why all workers don't get the same low wages, since according to our own argument market forces should drive all wages down to this ultimate minimum. A confusion has arisen between "subsistence costs" and "replacement costs". The function of humans is not simply to stay alive (subsistence), it is to have baby humans (replacement). new workers have to come from somewhere, unless the capitalists figure out how to breed us in assembly-line pyrex jars. As far as they're concerned, our job is to produce surplus value AND produce the continuing means to produce surplus value ie children.In capitalism, the function of workers is to have baby workers, and not just any workers, but newly minted versions of themselves. Society wide, plumbers must produce more plumbers, nurses more nurses, otherwise there will be no more plumbers or nurses. This involves replacement costs. In the case of a common labourer of Pitt's time, replacement cost would be so close to mere subsistence costs (food and housing only) as to be essentially the same thing. There would be no education or training costs to worry about. Therefore those wages were grindingly low, and workers obviously couldn't pay tax out of such wages. But try reproducing an accountant, or an engineer, or a barrister, and the minimum replacement costs skyrocket, and not always in ways easy to quantify. Such a worker, trying to produce their own replacement, will need far higher wages to cover these costs. Obviously their wages will tend to be higher to reflect this. But if the employers know their business, these better off workers will still be screwed down to the minimum they can afford to earn, and therefore will still not be able to pay tax.
Other factors of course play a part. But just as the price of a product will fluctuate around the value of the labour invested in it, adjusting for supply and demand, bargaining power, policies, special offers etc, so the price of a worker will tend to fluctuate around the value of the labour invested in him/her. Workers are obliged to pay for the education and upbringing of their children, even in welfare democracies. If you then place a tax on top of that, you are driving their wage down below what is sustainable, and they will drive it back up - the employer will end up paying that tax, sooner or later.
Let's re-cap. In order to continue working at their particular job with their particular skills, ie to recreate their labour power, workers need to consume a given amount. So wages tend to reflect the cost of buying these things. As far as indirect taxes (sales taxes, value-added taxes, excise duties, etc) are concerned there's no problem in theory : if these increase the prices of what workers must consume to recreate their labour power then so does cost of doing this and so also the price of labour power, ie wages. In regards to direct taxes on wages. If employers are paying the full cost of reproducing labour power (as they must in the long run and in their own interest as underfed workers don't work as well) then if taxes are a direct reduction of wages they would be driving wages down below the value of labour power. Which they don't do. What happens rather is that employers have to pay workers above the value of their labour power, which the state then creams off as taxes, reducing workers after-tax income to the value of labour power. But since in fact in most cases income taxes are deducted at source by the employer, it is in fact literally the employers who are paying the tax.