“Reform” by Karl Hess

Liberal reformers, among their many mystical rites, particularly are devoted to the rational use of the state’s taxing power. The most rational use, they seem to feel, is in the redistribution of income.

Thus, when Richard the Reformer Nixon recently announced that he too had seen the light and now was ready to smite the rich and relieve the poor, the pitty-patting of the vested ventricles could be heard loud in the land.

Alas, it is all nonsense.

Taxes can never seriously affect the incomes of the rich. Nor are there any known instances of the government actually transferring substantial sums of money to the poor regardless of its source.

Begin, if you will, with the corporations, those artificial, state-coddled economic monstrosities from whose especially privileged endeavors flow the major wealth of the very rich. Corporations cannot pay taxes. Customers pay taxes. Corporations merely collect them. The point is that corporations are not taxed like thee and me. The are taxed only on what they have left over after deducting all of the costs of making it in the first place. They do not pay taxes out of savings, the way individuals must. It is, therefore, apparent that tax increases, for corporations are paid simply out of price rises or, to repeat, by the customers.

The liberal zeal simply to increase taxes on the corporations is witless at best. It just shifts more of the heavy spending of the state into a relatively “painless” area where the dumb taxpayer, not realizing how the state happily encourages such fictions, growls about rising costs rather than about rising taxes which may, in fact, be what the price rise is about anyway.

But what about just taxing away all of the profits, wouldn’t that discourage price rises? Liberals just don’t know their corporations, apparently. The corporation is perfectly capable of declaring a zero profit at the end of any given year just by raising the bonuses, dividends or even salaries of its owning fat cats.

Conservatives, of course, have long since understood the invulnerability of the preferred position in which laws place corporations. They wouldn’t dream of blowing the whistle on them, however, because (1) conservative ideologues and muckrakers usually get their support from corporations, (2) they tend to be the relatives of corporate owners, or (3) they actually feel that the corporations represent some sort of countervailing power to the state.

That, on the conservative side, is as dumb a posture as the reform zeal is on the liberal side. Corporations in no way present a countervailing force to the state. The are, in effect, licensed by the state, they are treated in special ways (i.e. as though no one in them had any individual responsibility) by the state, taxed in special ways by the state, and so forth. They are either simply economic arms of the state or, to put it another way the state is simply the police arm of the corporations. Under the American system of state capitalism, as under the similar system in the Soviet Union, that’s just the way it is.

The liberal reformists, however, at least feel that they have been given a great lift by Richard the Righteous in that he has closed up a lot of loopholes through which the very rich have crawled without paying any taxes on huge incomes. The miss, in their mean little zeal for revenge, the big point about such people. The closing of one set of loopholes or, indeed, all loopholes, just means that the rich guy must shift his method of income. It is one of the concomitant strengths of being rich in a state-capitalist system in the first place that it supposes an ability to collect income in whatever form, whenever, and however desired. Only the poor must live pinned tightly to urgent weekly demands of wages and withheld taxes.

There are some loopholes, of course, that would cause pain if obliterated, such as the still scarcely scratched oil depletion allowance. On the other hand, it actually would be more productive of benefit to the poor if, instead of simply clobbering the oily ones, the notion of depletion simply was extended. Manual laborers, for instance, obviously are depleted faster than any damn oil well but the state obdurately refuses to acknowledge it.

Something similar may be observed in another liberal attitude toward the poor. The Nixon Administration’s decision to relieve the very poor of any tax payment at all is liberally viewed as government’s reasonable attempt to get more money into the hands of the poor.

The money belonged to the people in the first place! The government now is just refraining itself from stealing so much of it. But are the poor relieved of the war tax on telephones when they use them? Are they relieved of war taxes on other items? Are they relieved of the taxes and the tolls of the predatory local governments who prey on them? Of course not. In short, for every dollar that government boasts that it is getting into the hands of the poor, it is still likely–and there are no real studies on the subject–that the poor continue to pay more out in tribute to the state at all its wretched levels.

For instance, when government liberally boasts that the poor ‘get’ something from government they include in their bookkeeping the poor’s share of the monstrous defense budget or the lunatic lunar boondoggles. Those are programs the poor probably would be quite happy to fore go if only the government would get altogether off their backs.

The point of all this is that among the grandest mistakes reformers ever make is summed up in the attitude toward taxes and corporations and poor people. The state is simply a gigantic corporation, just like G.M., just as predatory, just as bureaucratic, just as “profit” (power) crazed, but with the added horror of having at its disposal the entire machinery of actual physical coercion.

To regard the taxes (profits) of the state as somehow more pleasant than the profits of the state-sheltered corporation, to think that the bureaucrats of the state have any more concern for the poor than the bureaucrats of the corporation, is one of the most fatal flaws in the reformist character.

Originally published in The Libertarian Forum Vol. I, No. XI, September 1, 1969