[lbo-talk] Progressive taxation vs flat tax

Bill Bartlett billbartlett at dodo.com.au
Fri Aug 6 18:21:02 PDT 2004


At 3:53 PM -0400 6/8/04, Jon Johanning wrote:


>As usual, Bill displays his ignorance of the U.S., even if his
>daughter does report back to him. He still doesn't get it straight.

That's how we learn, by making mistakes and being corrected. But my ignorance of the US is not the issue here.


> The Australian system is probably different, but everyone in the
>U.S. understands that the sales tax is not part of the advertised
>price. It only fools visiting Aussies.

That's what I said, but perhaps you didn't pay any attention to what I said. Yes, the Australian system is different, Australia has a value added sales tax system. 10% GST is charged on taxable items at every step in the manufacturing process. All goods and services with a few notable exceptions such as most food and financial services attract GST. I understand the system well because I manage the finances of a small housing co-operative which, fortuitously, is a tax exempt charity. The rent charged to tenants of the co-operative is GST-free, provided that we charge no more than 75% of market rents, which means every cent of GST the co-op pays on its inputs is refunded by the tax office.

So, as a result of the legal fiction that we pay GST on these inputs, every three months the tax office is obliged to pay us several hundred dollars.

But, as I say, the mechanics may be different, the retailer may be responsible for paying sales tax in the US for instance (whereas here in Oz every vendor in the chain of supply has to pay (10% GST on their net mark-up) but the principle remains the same. At the end of the day the consumer pays retailers for product and vendors pay tax. The mechanics of the tax are irrelevant to this debate, unless the consumer is personally obliged to pay the tax and that is not the case either here or in the US.

Now John Thornton thinks I don't know anything about running a retail business, however I ran one for 17 years, created it out of nothing, (with a little help.) With no capital to speak of. It was extremely successful. I know a great deal about retail business. I know for example that, while a small reduction or increase in price doesn't have an immediate effect on sales (except for a few items which customers unconsciously treat as indicators and are thus extremely price-sensitive) that eventually price changes will have an effect. It just takes some time to seep through to the customer's consciousness. Its a tricky business, there's a lot of "inertia" in retail. You can raise your prices and get away with it for months without the customer noticing, but when they do and correct their purchasing habits, it will take just as long for them to notice any correction you make to your prices.

You can go broke waiting for the customers to come back after correcting such a mistake. Some retailers get the idea this means that market share isn't very sensitive to price, but that can be a fatal error. John might be in some business where customers only purchase stuff intermittently and have a lot of trouble keeping up with the market. In which case the effect of retail inertia can be even more pronounced. But don't think for a second that the customer doesn't mind paying an extra 5% for "service" that they don't need, or fancy shop fittings. These things only annoy most customers.

I remember one customer a few years back popped his head into the back room while we were discussing getting the front door fixed. The customer said that he had noticed the door was squeaky and scraped the floor a bit when opened, he told us he liked it. It made him feel good every time he saw it, because he got a sense of satisfaction out of the fact that we apparently weren't charging enough to make the place flash. So we made sure the door didn't get any worse, but we kept it scraping a bit. A cost efficient marketing strategy. ;-)

I also know that workers take the view that the pay they actually get in their pockets is their real pay, not the "gross" wages that they get on paper (and only on paper.) The latter is irrelevant from the point of view of buying necessities.

These income or payroll taxes are, objectively, paid by capitalists. In fact all taxes are an expense which must ultimately be deducted from the profit share. For capitalists taxes are a necessary evil, because the state is necessary to defend their privileges. However it wouldn't do to let the proles think that taxes were a good thing so, as Jon says:


>"the owning class will always be able to rig the tax system in their favor"

They do this not by rigging the tax system so that workers have to pay all taxes, as Jon seems to imagine. (Get real people, higher income taxes would only necessitate higher wages, in order to pay the tax, so its no skin off our nose in the final analysis.)

Instead, what they do is rig the tax system so that, as much as possible, workers are fooled into believing that taxes are a bad thing for workers. And you've fallen for it hook line and sinker Jon!

So no more of this nonsense of which taxes are more equitable. Let the capitalists fight out amongst themselves who will pay a fair share of taxes. Taxes are a good thing, for the working class, because taxes socialise some of the profits and allow the possibility for redistributing those taxed profit for the benefit of the working class.

But all taxes are ultimately taxes on profits. It is ridiculous to fall into the trap of thinking that some taxes are paid by the working class.

Bill Bartlett Bracknell Tas


>
>
>Jon Johanning // jjohanning at igc.org
>__________________________________
>When I was a little boy, I had but a little wit,
>'Tis a long time ago, and I have no more yet;
>Nor ever ever shall, until that I die,
>For the longer I live the more fool am I.
>-- Wit and Mirth, an Antidote against Melancholy (1684)
>
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