Labour’s GST and conventional weapons

by Don Franks

In 1919 the New Zealand Labour Party won eight seats contesting its first general election, promising “Increased taxation on monopoly and increased graduated income tax with a corresponding reduction of indirect taxation for the purposes of removing the present burdens on family incomes.”

This echoed the Communist Manifesto‘s demand for “a heavy progressive or graduated income tax”, in both cases a tilt at the rich in favour of the poor.

This was back when the New Zealand Labour Party was a new act juggling two balls; socialist rhetoric and parliamentary politics.

Karl Marx type taxing was never going to be delivered by a party committed to respecting capitalism’s political rules and so it proved to be.

But in 1919, punters could be excused for taking Labour at its face value.

Labour had been in existence for only three years and was in large measure a creation of  working men and women. There was then little reason to doubt Labour’s bright new pro worker promises. 

Labour has now completed almost one hundred years of reliable service to those exploiting the working class.  fruit&vege

In today’s latest skip down that road Labour leader David Cunliffe merrily tweeted: “I’ve just dropped GST off fresh fruit & veges and $5000 tax-free zone. Better ways to help Kiwis. Bold new policies coming in 2014.”

Cunliffe’s protection of the goods and services tax is consistent, because GST was a Labour Party creation. Initially at 10 per cent, then later raised to 12.5 per cent, GST hits the poorest hardest – because low-paid workers must spend a far higher proportion of their money on basic goods and services than do the better-off. 

On the eve  of GST’s imposition, union economist Peter Harris complained:

“The GST collects a greater proportion of the income of lower income earners as tax than it does of the income of higher income groups….it is largely a way of reforming sales taxes. At present, sales taxes are charged on what the government has decided are luxuries and the more luxurious the item the higher the tax. Food attracts no tax. Cameras attract about 40% . A large part of GST merely lowers the tax on items such as perfume, jewelry, cameras and binoculars and recovers the money that is lost by taxing items such as food and other non-taxed items such as food and other non taxed essential goods and services.”

The  Labour Government’s 1985 introduction of GST was part of a package of ‘new right’ reforms after Labour’s election victory in 1984. The new government inherited an alarmingly high budget deficit and overseas debt, an inflated dollar, and rocketing inflation. The economy was in crisis, radical political adjustment of some description was required.   

In his pamphlet Night’s Black Agents, the Labour Party since 1984 Jim Delahunty noted: “Labour took on the task of saving capitalism here and so its scope of action was limited to the capitalist possibilities. . . In terms of parliamentary politics Labour had few alternatives – and it chose the worst from the viewpoint of NZ working people.”

 Jim continued:

“It is so much easier to bash the poor than bash the rich. The poor can’t fight back with conventional weapons. They have no legion of corporate lawyers and crooked accountants to plead their cause. They don’t have the monopoly owned newspapers to make propaganda from the day’s events in their holy task of protecting capital and those who own it at the expense of the poor.

“And if the people have no unions with the guts to fight and are represented by a ‘party of the people’ who have deserted the people, then the way is clear for a free run of capitalist market forces and the reign of Mammon in public affairs.”

At the time of writing this, there has been no union protest against Cunliffe’s recommitment to indirect taxation of the working class.

That is not surprising.

Despite the party’s anti-worker record, Labour can still count most union leaders as their loyal apologists.

To fight back and gain, the poor will need to forge some unconventional weapons.

Further reading:                                                                                                                             Understanding GST and tax policy

3 comments

  1. >In 1919 the New Zealand Labour Party won eight seats contesting its first general election, promising “Increased taxation on monopoly and increased graduated income tax with a corresponding reduction of indirect taxation for the purposes of removing the present burdens on family incomes.”

    >This echoed the Communist Manifesto‘s demand for “a heavy progressive or graduated income tax”, in both cases a tilt at the rich in favour of the poor.

    It’s also important to remember that the CM call for graduated income tax wasn’t a demand on capitalist governments; it was part of a platform to be carried out by a revolutionary government *after* state power was captured – the hope being that radical popular-democratic governments would come to power through the 1848 revolutions in continental Europe.

    Labour, of course, even in its ‘radical’ initial phase, never had any intention of such a revolution.

    A couple of decades later, Marx said outright that no form of tax regime would or could change the basic class relations, but income tax was less awful than indirect tax because at least with income tax workers could actually see and measure it clearly and it was clear how it operated.

    In terms of indirect tax, as Don notes, it hits lower-income folks harder because they spend more of their income on goods and services, especially the basics of existence. But the other aspect of this is that whereas income tax is *generally* paid out of surplus-value, not out of the value of labour-power, indirect tax is actually a deduction from the price equivalent of the value of labour-power. It is a deduction from the money that workers have to live on after being paid and this has important implications for workers’ living standards and for the division of surplus-value and, indeed, total value. See:
    https://rdln.wordpress.com/2011/08/08/understanding-gst-and-tax-policy/

    Phil

  2. PS: GST now is also 15%; Labour contributing 12.5 percentage points to it and National 2.5 percentage points to it.

    It’s also interesting how a chunk of wealthy people, while they might not have a Marxist understanding of the different relationships indirect and direct tax have to total value and to surplus-value, have a kind of instinctive awareness of which type of tax works best for them ion terms of profitability.

    A few years ago, when National was planning on raising GST to 15%, I was leafleting in Lyttelton with a Marxist bulletin on the subject, as we were trying to get a feel for whether there was a public mood that could be tapped into to have a campaign against the rise and do some educational work on the tax issue. A couple of rich folk walked by and one of them took a copy of the bulletin and said something along the lines that GST should be 25% and income tax should be abolished or should be reduced quite a lot (I can’t recall which). He was an employer and raising indirect tax and cutting income tax would actually be in his interest – unless, it provoked riots in the streets and undermined the stable social relations necessary for the calm accumulation of capital and private wealth.

    Phil

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