Die Neue Zeit
8th April 2012, 01:03
The state levied a tax on the sales of goods by state enterprises which was used to fund free social services. Taxes on private incomes were either low or non existent.
This policy was rather different from that proposed by Marx who basically favoured what amounted to income tax as the means to fund social services.
Meanwhile, I'm sure that the main argument behind the turnover tax was the same as today's arguments for VAT and sales taxes: they're more efficient to collect than income taxes, since the latter is subject to "tax planning" (up to and including tax evasion).
Ease of collection may have been an issue, but tax avoidance is not likely to be a serious problem in an economy without any significant number of private traders. PAYE in the UK works very efficiently for the vast majority of wage earners, it is those with property income that avoid tax.
The traditional argument against indirect taxation by marxists has been:
Indirect taxation falls disproportionately on those with lower incomes
If a socialist economy had completely equal income that might not be an issue.
Comrade, I wasn't arguing in favour of turnover taxation. There are a few other kinds of taxes that have ease of collection but are way more transparent (re. Marx). Like you and I have commented on before, land value taxation is one. If set high enough, it can replace all property taxes (taxes on land improvements), all consumer sales and VAT taxes, all payroll taxes funding unemployment insurance and other social security, and all income taxation for "hypothetical" low-income workers.
There are also income tax withholdings that are easy to collect, though of course they may be subject to tax avoidance a few months down the road.
But in a socialist economy that uses a turnover tax you have a situation where the apparent cost of labour is lower than its real cost. Means of production used by a state factory have the turnover tax included in their nominal cost, so a machine that cost say 10,000 hours to produce might be priced at the money equivalent of 15,000 hours. But 13,000 hours of direct labour by the workers in the factor appear to cost less than this. So although it may be socially more efficient to use a machine requiring only 10000 hours of labour, the factory will think it more efficient to use the direct labour. This acts as a drag on the use of new machinery and slows down the rate of improvement in productivity.
In the context of the modern economy (as opposed to the historical context), now I'm not sure. Companies are invoiced sales taxes by temp agencies and other employment agencies for the labour services that they provide. Your scenario would only apply if the labour is hired in-house.
In the case of either a "market socialism" with a Fully Socialized Labour Market (http://www.revleft.com/vb/supply-side-political-t152098/index.html) or a more planned economy with at least the same societal level of labour-power allocation (as opposed to hirings and firings by public enterprises), can there be a case made to reconsider turnover taxation?
Land value taxation can certainly replace all property taxes (taxes on land improvements), all "sin" and luxury taxes (and perhaps more, as suggested above), all payroll taxes funding unemployment insurance and other social security, and all income taxation for "hypothetical" low-income workers, but the remaining tax base still needs to be covered.
http://books.google.ca/books?id=FUh1QWH8_KYC&printsec=frontcover#v=onepage&q&f=false
A centrally planned economy [...] needs, of course, much greater revenues than a non-planned economy in order to meet its expenditures on investment and social programmes. The state as the monopoly owner of the means of production and the only entrepreneur can get these needed revenues in various ways.
[...]
It is easy to predict the yields of the turnover tax - because they are only a function of the tax rates and the size of sales, but not of the cost of production as is the case for a profits tax [...]
Unlike in past instances, this new turnover taxation could be much more direct than indirect. Already in past instances, the levying of turnover taxation on the leasing/purchase-and-sale of capital assets is direct. Considering the labour situation, there would be no tax intermediary when the polity contracts labour out to the various "projects" or public enterprises, the latter having no ability to hire and fire.
Finally:
There is also the political point that the tax is not transparent or so amenable to open democratic debate as the income tax scheme Marx proposed in the Critique of the Gotha Programme.
The tax rate itself could be made subject to regular public votes.
Thoughts?
This policy was rather different from that proposed by Marx who basically favoured what amounted to income tax as the means to fund social services.
Meanwhile, I'm sure that the main argument behind the turnover tax was the same as today's arguments for VAT and sales taxes: they're more efficient to collect than income taxes, since the latter is subject to "tax planning" (up to and including tax evasion).
Ease of collection may have been an issue, but tax avoidance is not likely to be a serious problem in an economy without any significant number of private traders. PAYE in the UK works very efficiently for the vast majority of wage earners, it is those with property income that avoid tax.
The traditional argument against indirect taxation by marxists has been:
Indirect taxation falls disproportionately on those with lower incomes
If a socialist economy had completely equal income that might not be an issue.
Comrade, I wasn't arguing in favour of turnover taxation. There are a few other kinds of taxes that have ease of collection but are way more transparent (re. Marx). Like you and I have commented on before, land value taxation is one. If set high enough, it can replace all property taxes (taxes on land improvements), all consumer sales and VAT taxes, all payroll taxes funding unemployment insurance and other social security, and all income taxation for "hypothetical" low-income workers.
There are also income tax withholdings that are easy to collect, though of course they may be subject to tax avoidance a few months down the road.
But in a socialist economy that uses a turnover tax you have a situation where the apparent cost of labour is lower than its real cost. Means of production used by a state factory have the turnover tax included in their nominal cost, so a machine that cost say 10,000 hours to produce might be priced at the money equivalent of 15,000 hours. But 13,000 hours of direct labour by the workers in the factor appear to cost less than this. So although it may be socially more efficient to use a machine requiring only 10000 hours of labour, the factory will think it more efficient to use the direct labour. This acts as a drag on the use of new machinery and slows down the rate of improvement in productivity.
In the context of the modern economy (as opposed to the historical context), now I'm not sure. Companies are invoiced sales taxes by temp agencies and other employment agencies for the labour services that they provide. Your scenario would only apply if the labour is hired in-house.
In the case of either a "market socialism" with a Fully Socialized Labour Market (http://www.revleft.com/vb/supply-side-political-t152098/index.html) or a more planned economy with at least the same societal level of labour-power allocation (as opposed to hirings and firings by public enterprises), can there be a case made to reconsider turnover taxation?
Land value taxation can certainly replace all property taxes (taxes on land improvements), all "sin" and luxury taxes (and perhaps more, as suggested above), all payroll taxes funding unemployment insurance and other social security, and all income taxation for "hypothetical" low-income workers, but the remaining tax base still needs to be covered.
http://books.google.ca/books?id=FUh1QWH8_KYC&printsec=frontcover#v=onepage&q&f=false
A centrally planned economy [...] needs, of course, much greater revenues than a non-planned economy in order to meet its expenditures on investment and social programmes. The state as the monopoly owner of the means of production and the only entrepreneur can get these needed revenues in various ways.
[...]
It is easy to predict the yields of the turnover tax - because they are only a function of the tax rates and the size of sales, but not of the cost of production as is the case for a profits tax [...]
Unlike in past instances, this new turnover taxation could be much more direct than indirect. Already in past instances, the levying of turnover taxation on the leasing/purchase-and-sale of capital assets is direct. Considering the labour situation, there would be no tax intermediary when the polity contracts labour out to the various "projects" or public enterprises, the latter having no ability to hire and fire.
Finally:
There is also the political point that the tax is not transparent or so amenable to open democratic debate as the income tax scheme Marx proposed in the Critique of the Gotha Programme.
The tax rate itself could be made subject to regular public votes.
Thoughts?