Capitalism and Taxation
|Written||7 July 1913|
Source: Lenin Collected Works, Progress Publishers, 1977, Moscow, Volume 19, pages 197-200.
Novy Ekonomist (No. 21 for 1913), a journal published by Mr. P. Migulin, with the Octobrists and Cadets jointly collaborating, carries an interesting note about income tax in the United States.
The bill exempts from taxation all incomes up to 4,000 dollars (8,000 rubles). Taxation is envisaged at the rate of one per cent on all incomes exceeding 4,000 dollars, two per cent on all incomes exceeding 20,000 dollars and so on, with slight increases in the percentage as incomes increase. Thus the plan is for a progressive income tax, but with an exceedingly slow rate of progression, so that the owner of a mil lion dollar income generally pays less than three per cent.
The plan estimates that the 425,000 people whose incomes exceed 4,000 dollars will pay 70 million dollars in taxes (about 140 million rubles) and the Octobrist-Cadet editors of Novy Ekonomist note with reference to this:
“Compared with the 700 million rubles import duty and the 500 million rubles excise duty, the expected revenue of 140 million rubles from income tax is negligible and will not change the significance of indirect taxation.”
It is a pity that our bourgeois liberal economists who are in words prepared to accept a progressive income tax and have even recorded it in their programme, have evinced no desire to make a definite and precise statement on what rates of income tax they consider to be obligatory.
Such rates that the significance of indirect taxation would merely be changed, and if so to what extent? Or such rates that indirect taxation would be completely abolished?
The American statistics that Novy Ekonomist touches upon provide an instructive illustration to this question.
It can be seen from the bill that the total income of 425,000 capitalists (if the tax provides 70 million dollars) is estimated at 5,413,000,000 dollars. This is an obvious understatement; a hundred persons are shown as having an income of over a million dollars and their income is shown as 150,000,000 dollars. We know that a dozen American multimillionaires have incomes incomparably greater. The Secretary of the Treasury in America wants to be “polite” to the multimillionaires....
But even these figures, excessively “polite” to the capitalists, show a noteworthy picture. Statistics in America record only 16,000,000 families. Of these, therefore, less than hall a million are counted as capitalists. The remaining mass of people are wage-slaves or petty farmers oppressed by capital, etc.
The statistics fix the size of the income enjoyed by the working masses in America quite accurately for a number of categories. For instance, 6,615,046 industrial workers received (in 1910) 3,427,000,000 dollars, i.e., 518 dollars (1,035 rubles) per worker. Then, 1,699,420 railway workers received 1,144,000,000 dollars (673 dollars per worker). Further, 523,210 public school-teachers received 254,000,000 dollars (483 dollars per teacher).
Combining this mass of working people and rounding off the figures we get: workers—8,800,000 with a total income of 4,800,000,000 dollars or 550 dollars each; capitalists—500,000 with a total income of 5,500,000,000 dollars or 11,000 dollars each.
Half a million capitalist families receive an income that is greater than that of almost 9,000,000 workers’ families. What, might we ask, is the role of indirect taxation and of the planned income tax?
Indirect taxation brings in 1,200,000,000 rubles, i.e., 600,000,000 dollars. The amount of indirect taxation is 75 rubles (37.50 dollars) per family in America. Let us compare the way in which the incomes of capitalists and workers are taxed:
income paid as taxes
|Workers . . .||8.8||4,800||330||7|
|Capitalists . . .||0.5||5,500||19||0.36|
We see that the workers pay seven kopeks to the ruble in indirect taxes while the capitalists pay one-third of a kopek. The workers pay, proportionally, twenty times more than the capitalists. A system of indirect taxes inevitably creates such an “order” (a very disorderly order) in all capitalist countries.
If the capitalists were to pay the same percentage in taxes as the workers, the tax imposed would be 385,000,000 and not 19,000,000 dollars.
Does a progressive income tax of the sort planned in America change much? Very little. From the capitalists 19,000,000 dollars indirect taxes plus 70,000,000 dollars income tax would be obtained, that is, altogether 89,000,000 dollars or only one and a half percent of income!
Let us divide the capitalists into middle (income 4,000 to 10,000 dollars, i.e., 8,000-20,000 rubles) and wealthy (with an income over 20,000 rubles). We get the following: middle capitalists—304,000 families with a total income of 1,813,000,000 dollars, and wealthy capitalists—121,000 families with a total income of 3,600,000,000 dollars.
If the middle capitalists paid as much as the workers pay, i.e., 7 per cent of income, the revenue would be about 130,000,000 dollars. Fifteen per cent from the income of wealthy capitalists would produce 540,000,000 dollars. The total would more than cover all indirect taxes. After the deduction of this tax the middle capitalists would still have an income of 11,000 rubles each and the wealthy an income of 50,000 rubles each.
We see that the demand put forward by the Social-Democrats—the complete abolition of all indirect taxes and their replacement by a real progressive income tax and not one that merely plays at it—is fully realisable. Such a measure would, without affecting the foundations of capitalism, give tremendous immediate relief to nine-tenths of the population; and, secondly, it would serve as a gigantic impetus to the development of the productive forces of society by expanding the home market and liberating the state from the nonsensical hindrances to economic life that have been introduced for the purpose of levying indirect taxes.
The capitalists’ advocates usually point to the difficulty of assessing big incomes. Actually, with banks, savings societies, etc., at their present level of development, this is a purely imaginary difficulty. The one difficulty is the class-avarice of the capitalists and the existence of undemocratic institutions in the political structure of bourgeois states.