Taxation and the capitalist State

Vanguard October 2010 p. 4
Duncan B.

The role of the State is the starting point for any consideration of the purpose and function of taxation in capitalist society.

The principal role of the capitalist State is to maintain the rule of the capitalist class over the working class. In Australia, the capitalist State acts in the interests of the richest and most powerful section of the capitalist class, the foreign and local monopoly capitalist corporations.

The State maintains their domination of society by a combination of means; using deception through monopoly control of the mass media and the promotion of parliamentary reformism and trade union politics; and, when deception fails, using forceful and violent repression through control of the army, police, courts and gaols.

The capitalist State also has other important functions. It acts, first and foremost, as the guarantor of the existence of private property. The capitalist State provides the legal framework for capitalism to operate and acts as the regulator of the general conditions of capitalist production.

It is the “committee of management” for the capitalist class as a whole, balancing the conflicting needs of various sections of the capitalist class with the interests of that class as a whole. This can be seen in the State regulation of banking, the finance sector of the economy, various licensing laws, the stock exchange and the existence of regulatory bodies such as the ACCC.

The State provides the infrastructure to allow the capitalist processes of production and circulation to take place – roads, ports, railways, means of communication, provision of water and electricity, a stable currency, etc.

The modern capitalist State is also forced to provide a minimum of social investment to maintain the working class as a commodity which will continue to be a source of labour for exploitation. Hence, the State will invest in such things as basic education, basic healthcare and basic public transport for the masses, but always at the most minimal level, never meeting the real needs of the working people. At the other end, there is no shortage of money for the education and training of the experts and apologists the capitalist system requires to keep it running.

Workers pay for the capitalist State
While the degree of State involvement in the economy has been reduced since “neo-liberal” ideology took hold, with the emphasis on deregulation of State controls, liberalisation of trade and capital flows, and the privatisation of government enterprises, the monopoly capitalists still need the existence of a strong State to safeguard their interests. State funds are used to socialise the capitalists costs and provide a safety valve against rebellion.

All of the functions of the capitalist State come at a cost. The capitalist State raises the necessary revenues by various means, including taxation imposed on the profits of companies and personal income tax on workers. Indirect taxes such as the Goods and Services Tax (GST) are also used to raise revenue.

Company tax is paid out of the surplus value created by the labour power of the workers in the enterprise. The capitalists resent paying tax. They see it as a waste of surplus value that should be going to boost their profits. They always seek to reduce their share of taxation, and to shift the main burden of taxation onto the working class. They employ battalions of accountants and lawyers to find loopholes and exemptions to minimise and avoid their tax liabilities.

Not only do the workers create the surplus value from which the capitalist pays his tax, but workers also have to pay tax on the miserable crumbs they get in wages from the capitalist! Workers have tax deducted from their wages and can’t avoid paying tax, and unlike the capitalist, they can claim very little in the way of exemptions or deductions.

Taxation in Australia
The Australian Government receives 64% of tax revenue from direct taxes. Of this, more than 40% of the direct taxes come from personal taxes, with the remainder from corporate tax and payroll taxes. The remaining 36% of tax revenue comes from the GST, customs duties and property taxes. The various States and Territories and local government also impose various taxes to raise revenue to finance their activities.

In 2006-7, 11.5 million individual taxpayers contributed $117,614 billion to Government tax revenue, while 730,000 companies contributed $58,538 billion. We can see there is plenty of scope to increase corporate tax to make the rich pay!

The campaign waged by the mining industry against the Rudd Labor Government’s proposal for a resources super-profits tax is the perfect example of the capitalists trying to avoid paying any increased share of tax. Although they initially welcomed moves by the Gillard government to back down on the scope and amount of resource tax on minerals, they are still clamouring for a large reduction in company tax.

The Business Council of Australia, representing the 100 largest, and mainly foreign controlled companies, is stepping up its campaign to increase the GST, currently set at 10%, in a bid to make to the working people pay an even larger share of the tax revenue collected by the government.

The capitalists also seek to have government expenditure directed away from social welfare, education, health, etc., and re-directed to benefit themselves. We see this every year at Budget time, when the employer organisations and lobby groups representing the capitalists bring out their “wish lists” for the government to consider.

Immediate demands hit at monopoly capitalist class
The Communist Party of Australia (Marxist-Leninist) has produced a list of immediate demands on current issues. They include demands relating to taxation, such as taxing the profits of the mining companies, taxing carbon emissions, and ending negative gearing on investment housing.

Other demands for affordable housing, better schools, hospitals and public transport hit at the attempts of the capitalist class to reduce government expenditure on measures that benefit the people, and redirect spending to suit their own needs.

These immediate demands need to be supported and promoted by all activists.