Taxes and production

The debate yesterday between Starmer and Sunak before the UK election came down to one word: taxes.

It is strange to think that Tories can still hammer on this word so effectively.

The cost of living crisis has meant any idea of increased costs to families is a non-starter. So, how to solve this issue without raising taxes on those people struggling to make ends meet?

The answer from the left should be easy, but it is hard to say without the accompanying gotchas from everyone right of sensible.

The social democratic program is built on the idea of reduced costs through central procurement, coordination of spending, and redistribution.

That is: bulk purchasing with income-based pricing.

The issue with that program is the buying is either funded through debt or through increased taxes.

Fine. This works and increased taxes should be an obvious part of the program.

The issue arises when we look at taxes inevitably raised to pay the debt or for the increased spending. There is some strange thing that happens where people expect not to have to pay for things that the "government" does. People think every tax dollar they pay is "extra" spending, even if they suddenly do not have to pay the directly out of pocket higher price in the private market any more. Net savings are not obvious to people.

Did I say "social democratic"? I meant what used to be considered social democratic.

40 years of neoliberalism has completely dulled people's understanding of what the social democratic program was, including those in the top party spots. Social democratic parties now think that there is such a thing as cheaper money from the private sector that results in not having to raise taxes.

And, they are not totally wrong, at least about the taxes part. Profit subsidies direct from government and private fees paid by users are now how we pay for a lot of "public" goods. Borrowing is not done by the government it is done by the "private sector" collaborator. Private sector credit is procured in the same way as a sub-contractor is, the state doesn't pay for it directly, it just gives the revenue tool away and someone else charges for the use of the new thing.

Giving away all of the revenue generation tools to the private sector is the main issue here. While the goal is to get the debt off the books and make it look like the government is not taxing people to pay for things, it is in fact, a great swindle.

Unfortunately, it is now kind of necessary. In the process of offloading revenue generating assets to the private sector and giving them ever increasing profit subsidies to take on the role of substitute state, we have given away all our money to them. Add to this the Tories giving profit subsidies to their friends through "tax cuts". The finances of the state are set-up now as a not-so-fancy ratchet, one that is structured to limit ability to get those revenues back later. Except through paying for an ever increased debt load.

So, when the Tories attack the centre-left on taxes, they are not totally wrong. The only thing that the centre-left has is tax increases to fund things. Indeed, it must raise taxes more than just the cost of doing those things. It must raise taxes to pay the debt that paid for the "cuts".

Tax increases on the rich are a lovely way to pay for the debt accrued to fund tax cuts (and then some), but that is not going to cut it.

What to do? Well, mostly it should be obvious for us to come up with an alternative: state revenue generation.

How? Ownership over productive assets, which is the opposite of selling infrastructure to pension funds. It is building and owning parts or all of a productive assets, charging just below market rate, and returning the surplus to the government for re-investment or social supports.

Such surplus here is a type "tax", but we call them "fees" and charge them to corporations. Fees controlled by a left-wing government result in the what is the reverse of a "profit subsidy".

There are many ways to do this and they can look even a little like privatization in different situations, but none of it is are new concepts.

Our public utilities are set-up like this, the LCBO in Ontario is like this, the Crown companies that provide productive assets are legislatively set-up to do this.

Capital cries foul, of course. You are "crowding out" private capital, but that is the point. Capital must pay for their plundering and you can do it three ways, reduce profit subsidies, tax their profits higher, or simply remove their ability to make profit in a market and provide the service yourself.

This is why capital fears industrial strategies and is also one of the two reasons they are necessary.