U.S. Politics

“Tax the Rich?”

By Chris Kinder

In the last issue of Socialist Viewpoint, Vol. 12, No. 2, we featured an article, “Revolutionary Organization and the ‘Occupy Moment’,” By Paul Le Blanc, and invited contributions in response to it and other related articles. This is a contribution to that discussion. —Socialist Viewpoint

In an era in which income disparity between the rich and the rest of us in the U.S. has risen to levels not seen since the 1920s; millions are unemployed, suffering declining real wages and losing their homes; and deep cuts are slashing all social services, it’s not surprising to hear the cry of “tax the rich” rising up from socialists, populists such as the Occupy movement, and just about everyone else on the left. But it’s dismaying to see socialists in the Trotskyist tradition, such as Socialist Viewpoint, latch onto what is essentially a reformist demand, and to do so uncritically (“Give the Damned Money Back,” SV March-April 2010, and “Tax the Rich! Occupy the Profits!” SV January-February 2012, both by Bonnie Weinstein).

“Tax the rich” is far from a transitional demand. Demanding taxation of the rich presumes the continued existence of the rich! But revolutionists seek to expropriate the rich capitalists as a precursor to creating an egalitarian, socialist society. Furthermore, this demand presumes, in the U.S. and other industrialized countries, that the masses in a wealthy imperialist state may benefit and prosper if only they can get a better share of the profits of the imperialist bourgeoisie, which are largely based on the exploitation of oppressed masses in formerly colonial countries abroad. It’s not a particularly internationalist demand. Hence, it has a social-patriotic tinge to it, unintended in the present case, but there nevertheless.

Blurring the class line

“Tax the rich,” like the “One percent vs. the 99 percent,” blurs the real class line. It’s not “rich” vs. “poor” or one percent vs. 99 percent; it’s the capitalist class vs. the working class and oppressed and exploited masses here and internationally. The capitalist class has a lot of hangers-on and defenders, such as the police (“part of the 99 percent”…NOT), as well as plenty of large petty-bourgeois elements, military officer class, numerous high-level professionals, and others.

The Death Agony of Capitalism and the Tasks of the Fourth International (1938) includes a strong section on “The Struggle Against Imperialism and War.” In it we find the following: “To the slogan of the reformists: ‘a tax on military profit,’ we counterpose the slogans: ‘confiscation of military profits’ and ‘expropriation of the traffickers in war industries.’” What is the difference between taxing the war profiteers of the (on-coming) World War II, and taxing the present-day barons of fraudulent fictitious capital? Both are reformist demands, which presume the continued existence of the exploiters and seek only to snip and prune.

Furthermore, “tax the rich,” by presuming the continued existence of the exploiter class, cuts off any avenue to being a “bridge” to a revolutionary program. As Trotsky explained in The Death Agony of Capitalism..., a transitional demand should help the masses to “find the bridge between present demands and the socialist program of the revolution.” Such demands compel the conclusion that only the abolition of capitalism under a government of the exploited can succeed in implementing the workers’ real immediate needs. As Trotsky put it, “It is easier to overthrow capitalism than to realize this demand under capitalism” (Leon Trotsky, “The Political Backwardness of the American Workers,” quoted in the introduction to “The Transitional Program,” IBT pamphlet, 1998.) 

Been there, done that

“Tax the rich” is not a new idea. It has a long history as a tool to keep capitalism alive and well, and safe from revolutionary overthrow, going back to the Rooseveltian New Deal, and well beyond. The best-known “founding document” of the bourgeois revolution, the “Declaration of the Rights of Man and of the Citizen” of 1789, declared, “A common contribution is essential for the maintenance of the public forces and for the cost of administration. This should be equitably distributed among all the citizens in proportion to their means.” Sounds like a progressive income tax to me. Adam Smith also held that the rich “should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion” (The Wealth of Nations, 1776).

Contrary to what is expected for a transitional demand, exceedingly high taxes on the rich has been realized under capitalism, at least for a (not insignificant) time. Roosevelt’s New Deal ideas around taxing the rich went way beyond anything being discussed in the current Occupy-inspired “conversation.” In 1942 FDR proposed a maximum income (another gimmick with a long history) of $25,000 per year. The Republicans balked at this, and so a compromise was worked out: the top tax bracket—incomes over $100,000—would be taxed at 94 percent! Both capitalist parties voted for this.

Furthermore, corporations were taxed at a rate 50 percent higher than individuals in the 1940s, compared to today’s rates, in which corporations pay about 25 cents for every dollar an individual pays. (These figures from economist Richard Wolf, “Why We Need a Strong Left Party”). 

FDR: “I was convinced we’d have a revolution”

Roosevelt was explicit that his New Deal measures were a defense of capitalism against the threat of communism: “I was convinced we’d have a revolution,” he said, addressing reluctant businessmen, “…and I decided to be its leader and prevent it…. I decided that half-a-loaf was better than none—a half-loaf for me and a half-loaf for you and no revolution.” This was quoted in “Reflections on Occupy Wall Street,” by Joshua Sperber, Counterpunch, October 29, 2011. Sperber points out succinctly that, “reform, if that is what is myopically desired, has not been historically won through mere demand or entreaty, but through the bargaining leverage that resulted from the threat of revolution.”

Roosevelt’s “half-a-loaf” measures such as these didn’t slow down the capitalists’ post-war boom, and they also didn’t prevent the working class from feeling the pinch of the wage controls and no-strike clauses of World War II, and measures such as the lifting of wartime price controls in 1946, which sparked a major inflation. 1946 saw one of the biggest strike waves in U.S. history, including the Oakland General Strike. The ruling class, flexing its muscles as the world’s new imperialist superpower, struck back at the workers with anti-labor laws such as Taft-Hartley and Landrum-Griffin, and directly attacked working-class leadership with the anti-communist witchhunts of the McCarthy era.

“The bourgeoisie takes away with the right hand…”

Finally, to make a long story short, the capitalists whittled away at the New Deal, and largely de-industrialized the U.S., in a compulsive drive to counteract the tendency of their rate of profit to fall by driving down wages domestically and internationally. Again from Death Agony of Capitalism: “…the bourgeoisie always takes away with the right hand twice what it grants with the left (taxes, tariffs, inflation, ‘deflation,’ high prices, unemployment, police supervision of strikes)” (This sentence was omitted from some U.S. editions of this document.)

“Tax the rich,” by being a long-standing capitalist reform demand suited to defusing revolutionary impulses in the masses, is uniquely suited to drawing socialists into cross-class alliances with petty-bourgeois and bourgeois forces. It also lends itself to co-optation of populist movements such as the Occupy and other left movements into collaboration with bourgeois politicians. Most of the Occupy supporters (in New York and Oakland at least) are not there yet, and SV is nowhere near. But take a look at the roster of Pied Pipers for the ruling class that we already have queuing up around this slogan...

Robert Reich, the academic former head of the Labor Department under Clinton, was virtually gaga in his yearning for a return to the New Deal, in a speech before 10,000-plus cheering UC Berkeley students and Occupy supporters that I attended last year in Sproul Plaza. Then there’s (I’ll call him Chuckles, the capitalist)—investor Warren Buffet—who has now been recognized by the President in the State of the Union as the guy who wants to pay at least as much in taxes as his secretary does (of course this income-tax idea wouldn’t come anywhere near to affecting his actual net worth, but that’s another problem).

Capitalizing on the Occupy “conversation,” Obama now has a “tax the rich”/stimulus program which is setting him up to get back some of those youth votes that put him into office the first time. Occupiers, anyone? I bet many of them around the country will be motivated to vote Democratic, given the lack of any serious (let alone revolutionary) alternative. California’s (governor of new-age past, and coal-in-your-stocking present) Jerry Brown has his own proposal as an initiative, which combines a minuscule income-tax hike on the rich, with a small regressive sales tax increase (pardon me while I vomit). All these folks must have read the Declaration of the Rights of Man, and The Wealth of Nations; or maybe they just want to save the ruling class the hassle of having to shoot people down in the streets a few years from now (and possibly lose the exchange).

Besides the sense of yearning for a liberal-capitalist fable of New-Deal past which “tax the rich” evokes—a past which can never be recaptured, by the way—the slogan consists of nothing more than tinkering with a capitalist system which can never be fixed. The SV articles are conscious that “tax the rich” must apply to more than just straight income, but they are not alone in that. Discussion in the hallowed halls of the bourgeois media is full of bright ideas. A simple Google search for “tax the rich” turned up the following very illustrative list (who says the capitalists don’t have democratic debate... among themselves, that is):

Obama: “Jesus would back my tax-the-rich policy.” —February 2, 2012

President Obama offered a new line of reasoning for hiking taxes on the rich on Thursday, saying at the National Prayer Breakfast that his ...

“Liberals vow to eliminate tuition, tax the rich and corporations,” Edmonton Journal?

The party would pay for the $1 billion in promises with $1.5 billion in tax hikes on big corporations and on Albertans who earn more than $100000 annually.

“Don’t Tax the Rich. Tax Inequality Itself” —New York

December 18, 2011 —To keep inequality in check, tax the wealthiest one percent when their income gets out of proportion with median income.

A response to “Don’t Tax the Rich. Tax the Inequality Itself.” —Forbes

“Taxing the wealthy: Diving into the rich pool,” —The Economist

September 24, 2011 —A growing number of the rich appear to agree. Wealthy Germans and French have signed petitions in favour of higher taxes. —Luca di ..

Peter Morgan: “Taxing the Rich Will Not Solve the Problem,”

December 7, 2011 —Money always does something. It is always being used to enable the functions an economy needs. By taxing the rich, all that is achieved is a ...

Democrats in Congress step up tax-the-rich efforts —,0,3665561.stor...

January 30, 2012 —They see it not only as a way to reduce the deficit by making the wealthy pay a bigger share, but also as a way to define the coming election...

One Percenter: Tax The Rich Because People Like Me Don’t Create ...

December 1, 2011 —Hanauer says that government policymakers who have lowered taxes on the rich for decades “had it backward.” He advocates for raising taxes ...

The New York Times Op Ed piece (December 18, 2011) advocates a formula which would automatically adjust tax rates so that the “average one percenter” would never make more income than the currently-existing “36 times” the average median income—a very high ratio by historic standards. An article in Forbes magazine rebuts this (yawn). Not to be outdone, pundits in the Huffington Post and Economist take the other side (taxes hinder growth, etc.—another yawn). Democrats in Congress “step up the tax-the-rich efforts,” and finally, venture-capitalist billionaire Nick Hanauer takes up the call with “Raise Taxes on the Rich to Reward True Job Creators” (Bloomberg, December 1, 2011). “I’m a very rich person,” he opines, but “…rich people don’t create jobs.” Sounding a bit like an Occupy spokesperson, Hanauer says, “Let’s tax the rich like we once did and use that money to spur growth by putting money back in the hands of the middle class.”  

Whew! With allies like these, who needs enemies? 

Not only is “tax the rich” not a transitional demand, but, in the SV articles, the demand for expropriation of the bourgeoisie is not even mentioned. In Trotsky’s Transitional Program, each and every partial demand and transitional demand is intimately linked to a whole, a whole which involves the expropriation of “several key branches of industry vital for national existence or of the most parasitic group of the bourgeoisie,” and to the goal of a “workers and farmers government” (in today’s terms, a workers’ government), which is identified as a popular formulation of the “dictatorship of the proletariat.”

“The most parasitic group of the bourgeoisie”?! In this day of world capitalist crisis, what could be more obvious than that the financial capitalists, identified since Lenin’s Imperialism as the dominant rulers of late-stage capitalism, are now more parasitic—and more hated—than ever before, worldwide? From the U.S. to Ireland, Spain, Italy and Greece, the crimes of the paramours of fictitious capital are plastered all over the front pages, for those who can read between the lines. If The Transitional Program says anything, it says that the objective conditions for working class revolution are not just ripe, but getting a bit “rotten.” How much more rotten are they now?! And, just because we are small and weak, we must not shirk from saying what is. The objective conditions demand revolution. That must be our message. That must be what we recruit to in any regroupment of Trotskyist forces.

The revolutionists must attempt to educate populists like the Occupy movement, not just rehash their thinking. To address the financial crisis, the housing crisis, and the looming Great Depression 2; as well as the income disparity; the immediate, and transitional, demand must be to expropriate the big banks and financial houses, with no compensation of course, and including no disruption of private individual and small business deposits. Immediately seize all assets, and return them to their proper owners. That means abolition of the mortgage debt owned by the expropriated banks and investors. 

This has to take place under the over-arching demand of nationalization of the housing stock, with existing residents guaranteed their right to housing, foreclosed-upon or evicted people returned to their homes, and the homeless also accommodated. This is similar to the way in which the Bolsheviks nationalized the land, while preserving the peasants’ rights to usage, rather than endorsing the SRs slogan of “land to the peasants.” This can only be brought to fruition with a workers government.