How to Reform Capitalism (not)

Preamble

Anarchists don’t advocate for either the state or taxation, let alone that those can be used to reform capitalism… but if we did, then here’s how we’d go about it.

TLDR: don’t tax income, tax the possession of assets that generate an income. Abolish income tax, corporation tax, and capital gains tax, and replace those with a blanket tax on business assets. This tax on the means of production would encapsulate land, natural resources, commercial property, and capital goods. It would essentially be non-domestic rates on steroids, but incorporating more levers to enable the government to fine tune economic output.

Spoiler: the ruling class will never permit this to happen.

Consumption is Unsustainable

Consumption is the main driver of the capitalism, and the present tax arrangement, which focuses on taxing income and surplus, impels the capitalist to seek exponential growth from a finite planet. Hence the environment ends up being sacrificed in pursuit of riches.

Deter Empire Building

As things stand, businesses are taxed on whatever profit they produce, driving them to reinvest in order to increase their asset base. But what if the burden of taxation were shifted onto those assets?

Tax Capital Goods

Productivity is ultimately what funds all existing taxes, so the bulk of tax could simply be deducted at source. Those who own the means of production benefit the most from society, so this would be a tax on the workplace rather than the worker. Since the proposed tax would be only be levied against capital goods rather than the workforce, this would favour the creation of productive jobs.

Close the Loopholes  

tax haven

 Consider the following points:

i. Abolishing income tax would bring about significant administrative savings; no more tax returns, tax brackets, or tax allowances, and a vastly simplified bookkeeping and payroll process.  

ii. Abolishing corporation tax would greatly simplify corporate tax returns, with businesses instead being assessed on their assets. Accountancy and auditing fees would also be dramatically reduced.

iii. Capital gains tax would be rendered obsolete, encouraging organisations to divest unprofitable assets rather than clinging onto them.

iv. There would be less scope for large corporations to avoid tax, because assets are much harder to hide than money. A business cannot keep a factory or a retail outlet in an offshore bank account, and any entity with assets onshore would have no option but to pay its tax. Personal tax avoidance/evasion would no longer be an issue either, since incomes would no longer be taxed.  

v. Many minor taxes could be abolished, simply by factoring in specific rates for various classes of asset.

Legislate Against Greed

There would then be less incentive for capitalists to reinvest in expansion, since tax liability would increase proportional to holdings. This would help mitigate the rise of monopolistic corporations. Companies would seek to reduce the size of their premises, which they could achieve by eliminating hierarchy, and encouraging working from home (with positive knock-on effects on congestion and traffic pollution).

The inclination would instead be towards state owned industry complemented by smaller steady-state private businesses.

Impel Ethical Business

Wealth generation would no longer be facilitated by driving consumption, but rather through fulfilling genuine need and engineering stuff to last rather than for obsolescence. The bargaining power of labour would also increase, since the capitalist would find it more expensive to maintain the means of exploiting labour, thereby narrowing the earnings gap.

Dream On…

This would be the establishment’s worst nightmare, given that it places the cost of maintaining the state squarely onto the owners of private property (where it belongs). It’s unimaginable that such reform would ever even be considered, let alone publicised or implemented.

So while a lovely idea, the only practical solution to our self-extinction problem is the abolition of both the state and capitalism.