Home > political-economy, shorter work time > Tax cuts for the rich?: the endless debate

Tax cuts for the rich?: the endless debate

There is an ongoing argument between the Left and the Right which can be summed up thus:

Tax Cuts Do Not Work

and, its opposite:

Tax Increases Do Not Work

Tony Wikrent makes a powerful argument for the Left in his post, The Obama tax deal with Republicans is insane:

The central premise of U.S. economic policy since the election of Ronald Reagan in 1980 has been that the people in the private sector who know how to invest – the rich – do a much better job allocating society’s financial resources than the federal government. In fact, Reagan told us in his first inaugural address, “government is the problem.”

In order to get as much of society’s financial resources into the hands of the rich – the people in the private sector who supposedly would do a better job investing it – Reagan, the Republican Party, and American conservatives in general developed a simple-minded faith in tax cuts, especially in reducing taxes on the highest incomes.

What are the results of this thirty year experiment low taxes? The Reagan / Republican / conservative theory DOES NOT WORK. For the first time in American history, we now have a generation that has less education and worse economic prospects than their parents did thirty years ago.

In all the hub-bub and brou-hah-hah of the tax debate the past few days, weeks, and months, hardly anyone has put forward the clear and unambiguous information that

TAX

CUTS

DO

NOT

WORK.

The definition of “work” is, of course, subtly redefined by each side in the debate, as would be expected, since the object of the debate is to obscure rather than enlighten. By the same token, measurement of “work” requires some consistent standard, but this is an ideological debate, not a scientific one, so each side also has its own set of measures by which it judges “work”.

However, both sides agree that they are talking about The Economy, which is to say, both sides are talking about capital – a distinct set of social and material relations among the members of society that are established between these members through their activity. So, in some sense, by “work” we can deduce each side is asking the question:

“Which policy makes capital work better as capital: tax cuts or tax increases?”

As with any argument of this sort, the answer is undefined. Under certain circumstances, tax cuts will make capital work better as capital. And, there are certain circumstances where tax cuts will make capital work less well as capital. There are also circumstances where tax increases will make capital work better as capital, as well as the reverse.

Finally, there is a circumstance where neither cuts nor increases will have an effect on capital. We are in that circumstance now.

Since capital is a very complex social organism with its own historical trajectory there is no hard and fast rule on what will be most conducive to its operation at any given time. It is not possible, for instance, to draw any hard or fast rule about the usefulness of tax cuts for the very wealthy by examining the economic policy of the Reagan or Clinton Presidencies. The Reagan Presidency began just as the nation was emerging from the severe depression of the 1970s, while the Clinton Presidency covered the peak period of that same expansion.

The Bush II Presidency began just as the peak expansion came to an end, resulting in a depression that, so far, has lasted from 2001 to the present. By the time Barack Obama took office, not only was the world market firmly gripped by this depression, but the very mechanisms of economic management — fiscal and monetary policy — had broken down in the ruin of the Great Financial Crisis.

The GFC is a rather unprecedented set of circumstances precisely because the entire structure of modern society now rests on the capacity of the State to counter the capitalist breakdown by managing the continuous expansion of superfluous labor. This superfluous labor is most familiar and obvious to us when it takes the form of Minsky’s Ponzi debt growth, but that is only its monetary expression.

Suppose, we zeroed out taxes for the entire top five percent of society, federal, state, and local (we might argue, as the Right do,  that they already perform an incalculable service to society by employing the bottom 95 percent), would this make capital work better as capital? I would argue, “No.” Capital would continue to operate pretty much as it does. Likewise, were we to zero out the taxes of the bottom 95 percent (we might argue, as the Left do,  that those who make more should pay more), and levy taxes solely against the top five percent, capital working as capital would be unchanged.

The reason for my conclusion is that capital working as capital is no more than a tiny slice of the wealth in society — it is only that portion that is actually put into circulation as self-expanding value — that is, productively employed labor. The reason why government economic policy became so important to the economy was not to increase the productive employment of labor, but to manage and grow the massive expenditure of superfluous, or unproductive labor.

The severe damage to government management of the economy using fiscal tools like tax cuts or increases, which was caused by the Great Financial Crisis, has hurt the productive employment of labor (capital) only because the constant expansion of unproductive employment of labor is the fundamental condition for capital’s operation.

To put this another way: it take so little productive employment to produce everything we need, that only by employing the vast majority of people unproductively can they acquire the wages to buy it.

And tax policy won’t fix this.

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  1. December 9, 2010 at 2:17 pm

    12-09-2010 @10:14 AM

    Good analysis brother. I am not an economist ~ I am more of a spiritual being trying to survive and succeed in this often wicked world governed by corporate capitalism, protected by state fascism and ~if worse come to worse~ imposed upon us by raw, brute force by the U.S. military: violence! We will find that a lot of these social issues and social questions revolve around violence, but that’s another story.

    The ideal here is to utilize humane energy in the form of labor for what is really needed by society for us to meet our basic needs, not work for work’s sake. There are many forms of work. I am not unemployed yet I think that the expenditure of my energy in creative ways has social and personal value.

    A lof of it also has to do with maintaining a high level of self-esteem. A good man appreciiates being able to be of value to himself, to others he cares about and for society in general. One’s has a natural desire to be useful, to be over value, to be productive. We are not in shortage of labor in the world, there is so much good work to be done.

    What we ultimately need is to topple the Amerikan Empire and replace it with global democratic socialism, that is, a fundamental revolution in property relations between the ‘haves’ and the ‘have nots’. The grand strategic aim remains the same, the seizure of power by any means mandatory by the masses led by vanguard elements. Leadership is essential. Revolutions do not just happen by magic mantras, they are consciously manufactured by the vanguard elements who have pulled ahead of the masses in existential social praxis.

    It is not even about taxes, improving a corrupt dying corpse but about raising revolutionary consciousness. All roads lead to revolution. Nada mas ahora. Been up since 3:30 AM. Time for a catnap. Crossover!

    Namaste, Che Peta ~Coordinator- Humane Liberation Party ~ http://help-matrix.ning.com/ ~ c/s

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