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A recent commentary piece by Matt Fodor, published in The Bullet, the e-paper of the Toronto group Socialist Project, raised an interesting issue that has been much debated within the workers’ movement—the role of taxation. Titled “Fueling the Tax Revolt: What’s Wrong with the NDP’s Anti-HST Campaign,” Fodor argues that the manner in which the NDP is opposing the HST in BC and Ontario dovetails with the arguments of the right-wing—that taxes are evil and that this foments an “anti-tax sentiment among the general population.” Instead, Fodor insists that taxation is absolutely necessary to fund the welfare state, citing the example of the “Nordic social democracies.” Fodor argues that instead of opposing the HST, the NDP should actually be trumpeting the benefits of taxation as a means for paying for more programs and services.

It is not normally Fightback’s position to criticize other left tendencies; we feel that workers already tend to ignore small grouplets in favour of their traditional mass organizations, and petty sniping on the left is of no interest to them. However, we felt that this was a good opportunity to clarify the genuine Marxist position on the question of taxation. In addition, we believe that Fodor presents a reformist viewpoint that goes some way to explaining the lack of popularity enjoyed by the academic left amongst the working class. Such a glaring mistake is at the heart of much confusion and could not go unanswered; it is amazing that such reformism could be presented in a “Marxist” journal. It is not clear what the opinion of the Socialist Project editorial board is towards Fodor’s article. Fodor is on their Advisory Board, but they state that, “Signed articles reflect the opinions of the authors and do not necessarily represent the views of the editors.” We hope that Fodor does not represent the views of Socialist Project on this matter, and we present the below reply on behalf of the Fightback editorial board and request that Socialist Project publish it to set the record straight. If they don’t agree with Fodor, publishing this should be no problem; if they do agree, this critique applies to them as well.

Ontario and BC have recently seen the introduction of the new Harmonized Sales Tax (HST), intended to replace the old provincial sales tax in both provinces. On the face of it, this would seem to be a minor clerical change. However, the HST is going to apply to almost all goods and services, including many that used to be PST exempt; the net result is that dozens of goods and services are instantly going to be up to 8% more expensive for working class people.

The HST has been at the heart of a backlash against the Liberal government in British Columbia. The movement against the HST was able to mobilize 10% of the electorate in all 85 provincial ridings to sign a petition rescinding the tax. In Ontario, although there hasn’t been the sort of popular revolt against the HST as there has been in BC, it is still a reviled tax and is contributing to the Liberals’ declining fortunes in the province.

Left-wing HST critics denounce it as a “regressive tax” that disproportionately affects poor and working class people. Because all people pay the same percentage, regardless of their income, working class people feel the tax bite to a greater degree. Moreover, the revenues generated from this tax are not being funnelled into any sort of social service. The plan is for them to be revenue neutral with funds channelled directly into tax-cuts for business. The only purpose of the HST is to pass more money from the pockets of the working class to the pockets of the bosses.

Who pays for the crisis?

Workers are sick of the fact that everywhere they turn, somebody’s hand is in their pocket. Whether it is the boss in terms of lower wages and conditions, the landlord with higher rent, the banker with fees and interest, or the government with taxes, at the end of the day they are worse off, and they don’t necessarily differentiate between the different exploiters. If the soft-left ignores this fact, they will just be lumped in as another “elite.” Workers will be driven into the arms of the right-wing demagogues (especially the likes of Bill Vander Zalm in BC) if the leaders of the workers’ organizations do not take up these issues.

Instead, the logical conclusion of Fodor’s argument is that we should support the implementation of the HST, because taxes are good. In fact, to back up his argument, Fodor quotes CAW president Ken Lewenza, who said, “The harmonized sales tax, as unpopular as it may be, cannot be an issue from the progressive side. It can't be an issue that makes Ontarians more cynical about taxes. We want to pay taxes. We want a civil society. We want health care. We want education. We want infrastructure. We do not want every Ontarian to think that taxes are bad.”

The fact that the leader of the largest private sector union is unwilling to fight the HST, which leads to a transfer of wealth from the poor to the rich, is scandalous. It is no wonder that so many workers feel let down and are looking for any sort of leadership, from any direction. Fodor aims his attack at the NDP leadership; while we may be critical of this or that part of their campaign (especially the BC NDP cozying up to Vander Zalm), the main target of our critique would be at the union leadership that has ignored this issue and failed to help the NDP mobilize a mass movement around it from the left. The implementation of the HST, although only a couple of months old, is already starting to have its effects. In Ontario, for example, the inflation rate in July went up by 2.9% over last year, with all but 0.7% of that increase attributed to the HST (CBC News).

Fodor appears to ignore the rich history of workers fighting against unfair taxation. Leaving aside the legend of Robin Hood leading a peasant revolt against King John’s tax collectors, we have the fantastic movement against Margaret Thatcher’s “Poll Tax” in the late 1980s. The British Conservatives tried to change municipal taxes from a moderately progressive system, based on the value of your house, to a flat tax. This movement was led by the Marxist Militant Tendency and at its height, 14-million were not paying. This not only destabilized the tax, but it was also the last straw that brought an end to Thatcher’s hated reign. An even more recent example is the impressive series of general strikes against the Greek austerity measures. One part of the Greek austerity package is a 2% increase in sales tax. One wonders how friendly a reception Fodor would get if he tried to extol the virtues of taxes on the streets of Athens today!

Since the beginning of the crisis, Fightback has been saying, “Make the bosses pay for their crisis!” But here we have, in the organ of Socialist Project, a call to “Make the workers pay for the bosses’ crisis!” As a generality, not just Marxists, but also Socialists and left-wingers, should be in favour of anything that reduces the burden on working class families and opposed to anything that leaves workers poorer. Using these criteria, Fodor’s position is not even reformist.

Does progressive taxation work?

The traditional reformist left (in as much as they still promote “reforms”) holds up progressive taxation as a way to pay for the services and programs needed by workers and youth. On the surface, this seems to be the ideal way to make the bosses pay. But, does it actually work?

Reformists have been trumpeting these ideas for decades. The problem with progressive taxation and the welfare state is that it is a utopia under crisis capitalism; even the so-called examples from the “Nordic social democracies” do not hold water. The gains won by the working class in countries like Denmark and Sweden have been under attack over the last three decades, just as they have been around the world. In fact, as this article is being written, Sweden has just re-elected a right-wing government that aims to further cut taxes, slash welfare and unemployment benefits, and “trim” the welfare state (BBC News). The G20 detailed plans to cut the expenditure of all governments by up to 40% and this is the only possible future while capitalism persists. It really is a reformist fantasy to believe that if the workers keep their heads down and accept higher taxes and lower wages now, then all will return to social-democratic normality in the near future.

The driving force behind capitalism is the profit motive; businesses will only produce if they can secure sufficient profit. If they can find somewhere else where their profit can be greater, then they will have no qualms about relocating.

You do not have to be an economist to realize what will happen if higher taxes are levied against the capitalists—they will threaten to relocate, putting workers out of a job. We have seen this threat being carried out many times before.

Canadians will remember the cases of capital strikes by the bosses when NDP governments were elected in both BC and Ontario in the 1990s. This is the problem facing Venezuela today, where the Venezuelan oligarchy refuses to invest despite billions of dollars in loans being offered by the Venezuelan government. When a Labour government was elected in Britain in the 1970s, with a platform of very modest reforms, the IMF stepped in, ordering the government to overturn the program that they were elected on!

Of course, if NDP leader Jack Layton or the union leaders propose higher taxes on corporations and the rich, this is much more preferable than the other possibility—corporate tax cuts or cuts to public programs and services. But, we cannot pretend that, by itself, this would be a solution to the problems faced by working class people.

The correct position for socialists to take is to demand the nationalization of the commanding heights of the economy, under democratic control of the working class, as part of a socialist plan of production. In this way, production (and all of its benefits) could be put towards the needs of society, rather than profits going into the pockets of the bosses. This is the only solution that is open once the bosses threaten to relocate production if their profits are threatened. Although the revolution has yet to be completed in Venezuela, Hugo Chávez was pushed to nationalize several industries and banks once it became evident that the Venezuelan bourgeoisie was attempting to sabotage the economy and the gains of the revolution. Unfortunately, this has not yet gone far enough and a hybrid situation remains. Capitalism does not function, but there is no socialist plan. The Venezuelan revolution will only be truly finished when this contradiction is resolved. Until then, the success of the revolution remains under threat.

Fodor’s idea of taxes as a general good, put forward in the publication of Socialist Project, does a disservice to workers and youth who are looking for socialist answers. If socialists support regressive taxation measures like the HST, then “socialism” will be confined to the ivory towers of university campuses. Progressive taxation is a preferable position, but even this demand has its limitations. Although progressive taxation may look like a “simpler” solution, it is untenable in this period of crisis capitalism. Only by fully eradicating capitalism, and instituting a society that produces for need and not profit, will workers be able to defeat the austerity of the coming years. And only by adopting the above perspective, will socialists be able to lead workers away from right-wing populism.

Addendum:

After submitting our response to Socialist Project (SP), we got the below reaction. It took us a while to decipher the academic language, but the upshot of their reply is that they do indeed support the HST. In fact, they do not even consider the HST to be a regressive tax; it is a “proportional” tax – a previously unheard of 3rd category!  We'll inform McGuinty and Campbell's spin doctors--they are sure to find this terminology useful.

One of their points is actually a distortion of Fightback’s position, saying that we support the “alliance” between the NDP and Vander Zalm in BC and Hudak in Ontario. It is pretty clear from reading the original text, and this article from Fightback Issue #40, that we do not support this alliance in BC. We also would be the first to critique the Ontario NDP leadership if it united with Hudak, however as far as we can see the ONDP has maintained a separate banner on this question (see this Toronto Star article as an example). It is a disservice to one’s readers to distort anybodies position, either the Ontario NDP’s or Fightback’s. They try to paint us as in favour of this or that tax structure when any intelligent reader will see that we do not promote any of the tax structures under capitalism. Our position is to promote nationalization under workers control while generally supporting “anything that reduces the burden on working class families” and opposing “anything that leaves workers poorer.”

It is ironic that SP repeats their position on the same day as a poll is released stating that 81% of Ontarians oppose the HST and it is significantly eroding support for the Ontario Liberals. In effect their position is to just tell workers that they are too stupid to understand that the HST, the GST and other regressive taxes are good for them, in the same way as they think workers are stupid when they support the NDP. We re-iterate that the task of Marxists is to walk together with workers in these questions in order to help them to reject both right-populism and reformism. We may not be very popular in academia or amongst “left economists” for this position, but that is something we can live with.

***

Date: Tue, 28 Sep 2010

From: Socialist Project [info@socialistproject.ca]

Thanks for sending the comment and we will circulate among the editors and others to discuss. Here are a number of points in response:

1. we have already published two sides to the debate with the piece by Roger Annis;

2. in typical polemical excess of certain strands of Marxism that fall into cliche, the argument is misconstrued. It says that we cannot do without VAT taxes; it is also not saying that tax shifting is being done in a regressive manner or that progressive taxes are not needed. This is a point made across innumerable articles we have published -- a rather obvious point, that seems beside the point to even make;

3. you cannot address the inequalities of modern capitalism based on tax policy constructed in 1848 when there was no income taxation;

4. it is elementary economics, from all strands of thinking except the hard right, that taxes cannot be looked at apart from the expenditures they fund. Proportional taxes like VAT or sales taxes (they are not regressive) fund services that are delivered in a progressive manner -- parks, healthcare, education, and thus ended being redistributive. Their analysis would support the tax system of the US and oppose Sweden's because the US has less VAT taxes and more progressive taxes, although the social impact of the US system of taxation is to increase inequalities. Should the left also be campaigning now against CPP taxation, EI taxation, taxation on alcholol [sic], gas, tobacco -- some of these being in particular regressive taxes in how they are leveled?

4.[sic] the article overlooks the number of left economists in unions and outside unions that also oppose the NDP campaign against the HST (while all also argue for higher taxation as a whole, and esp [sic] taxes on income and capital, as does Fodor);

5. the essay does not address the opportunistic alliance between the NDP and the right (with Hudak in Ontario and Vander Zalm in BC); indeed the essay apparently supports it, including the holding of joint rallies and campaign building with these neoliberals;

6. we have published innumerable critiques of social democracy and the contradictions of the welfare state under capitalism. That is why we oppose the politics of misleadingly working within the NDP and failing to understand the opportunistic politics, including the right-wing populist positions, that these parties embrace, and systematically mislead workers on.

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Pance SP Websteward

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