On taxation

Over the past few days, we have seen the discourse around the latest MET Gala. Particularly of interest was the actions of Alexandria Ocasio-Cortez who attended the ball wearing a white dress with the words “Tax The Rich” painted on its back. Leftists the world over criticised this act as a self-indulgent, performative piece that ultimately had very little material impact outside of optics. This is good criticism as simply displaying these sentiments without addressing the core issue, especially in an event where excessive wealth is flaunted, is particularly strange for a self-described socialist. What more when the MET Gala is juxtaposed with Black Lives Matter protests happening just outside the event which were also violently suppressed by the police.

Then again, politics in America is always filled with contradictions. Even those who have successfully radicalised many Americans in the past few years such as AOC and Bernie Sanders are not exempt from this. Whilst I can go on to criticise AOC and Bernie even further, with the former using her gender to deflect criticisms and the latter holding questionable opposition to many actually existing socialist countries, I would like to take some time to analyse the call to tax the rich and what a proper socialist take on it would be.

Generally, progressives who are not Marxist call on more progressive taxes on the rich including taxes on wealth, inheritance and capital gains as an end onto itself. To them, simply taxing the rich would be enough to end all economic maladies we are facing. This, however, is not a panacea. To understand why, we must employ a Marxist analysis on capital and its relation to power.

Simply put, capital is power. The more capital one has, the more means of production one owns, the more power one holds, especially political power. Any attempt to introduce greater taxation targeted to this group of people, whether through wealth taxes, inheritance taxes or even corporate taxes, will be met with immense pressure against it. The capital owners have a huge leverage against these governments as they can threaten to leave and take their business elsewhere to more lenient countries.

In fact, they may not leave the country but just set up shell companies elsewhere with more lenient tax laws. This is problematic as a mechanism for tax avoidance can be set up in tax havens and also if production is moved to another country, we would just further imperialism as the marhaen in the new country is taken advantage of for lowering costs.

Even without capital flight, local capitalists can retaliate against this legislative step. With the ownership of the means of production, they can employ such tactics as emphasizing more on contract work instead of permanent work, increasing automation and outsourced labour to decrease labour cost. This will increase the pressure on the government as there will be more unemployed and underemployed workers to manage, with those who are employed receiving worse benefits and wages. The level of discontent directed towards the government then forces them to work together with these capitalists to ensure their business decisions do not adversely impact the masses.

This puts legislation on the line where capital interests have to be prioritised due to the whole economy being tied to private capital holders. So, a legislative approach alone would eventually fail within a capitalist system as private wealth affords with it power to influence the very mechanism of extracting this wealth. All of this, keep in mind, still operating within the constructs of the law. It is very simple from here to imagine means of utilising this capital in less legal manners. For example, funding parliamentarians specifically to further their cause in opposition to the interest of the people is rampant and highly encouraged by the current political system. Otherwise, engaging in corruption, smuggling and other overtly illegal tactics to undercut governance, discrediting legislation made to control them and subvert the expectations of the masses can and will be done by those with capital to keep hoarding as much capital as possible.

Marxists understand this as the main threat of private capital. This is why we go further than a naïve approach of redistributing wealth through taxation on to taking over the means of production. This means charting a way forward to a future where all of the means of production are owned collectively by the people. This eliminates all of the above threats as the goal of production turns to meeting the collective needs of the masses with no private motive of maximising profits. The threat, as we now can see, is not management of private capital, it is the very existence of private capital in the first place. How we get from the current system to that future state is what we must envision.

Of course, an immediate overhaul of the capitalist system, even if it may be in a single country, is not possible. Even if we were to think of a direct transference of power to the people through a revolution, navigating past the many challenges capital will throw at the victors will require nuanced handling. For example, post-revolution there may be insurrections by foreign troops funded by former private capitalists who are still rich with their wealth sitting in offshore accounts. There may be local disruptions made through destruction of the tools of production like machinery.

This is assuming the initial revolution can happen in the first place. We must remember that capitalists are not going to let the tools of their destruction exist for long. They crush these through the state that they control and its various implements, from biased courts to the police force. In this regard, with the left being so weak, we must think about how best we need to move forward. This is where the support for better taxation comes in. Remember, Marxists are not opposed to taxing the rich, we just do not think it alone can solve much. However, in the capitalist system with capitalist governments, we must be realistic that these governments will not push for the takeover of the means of production as they are put in place to protect private capital in the first place. What more, for countries like Malaysia, the state does engage in the economy directly for GLCs and GLICs but these function in practice like private entities as they are so detached from the common person.

Moreover, whilst taking over the means of production may be too far-fetched for the common people, better taxation is easier to be understood and articulated. Hence, we can use taxing the rich as a gateway to relate to common people. However, we as leftists must go further by illustrating the issues with only taxation. We must showcase the futility of relying on it and push forth the correct narrative of the retaliation of capital against these laws. Building from this, we must also showcase how we intend to build the economy if socialists were in power.

As an example, initially we can push for a maximum wage in GLCs and GLICs such that CEOs and senior executives are only paid a set multiple of the minimum wage. This can help create parity between management and workers in the short run whilst increasing profits so that a higher minimum wage can be set with minimal resistance. In the longer run, the main agenda in Malaysia can be socialising GLCs and GLICs through introducing worker self-management and making these subservient to the will of the masses by linking them to People’s Councils as I have explored here. Then, we can utilise the wealth generated through these to create more jobs away from the private sector. With enough job generation through this method, the reliance of the economy on the private sector is reduced as is their influence. This will allow better legislation such as taxation to be more effective as more and more of the means of production are taken over by the people.

Marxists should not fall into the trope of better taxation meaning Marxism. It is a small part in the pathway to build socialism. Whilst we use it as a tactic, we should not showcase it as the main or only part of our economic analysis.

Arveent Srirangan Kathirtchelvan,
Head of Science and Technology Bureau,
Pemuda Sosialis,
Parti Sosialis Malaysia.

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