Where Does the Money Come from for Social Programmes and Public Services? 

– K.C. Adams –

Many Canadians are supportive of the idea to increase investments in social programs. Suggestions abound as to how to solve the country’s many social problems such as expanding public K to 12 education to include daycare and extra-curricular programs for all ages. Two issues arise: first, the people have no political power to put their good ideas into practice; and secondly, they come up against the problem of how to find the social wealth necessary for investments.

The first problem of empowerment is an issue of organizing and fighting for democratic renewal to bring the people to political power. The second problem has more to do with how the socialized economy is viewed, analyzed and controlled. Canadians are caught in old dogmas of how value or social wealth is created, circulated, claimed and controlled. Political leaders on the left and right wings of the official political spectrum are at pains to find rational methods of raising public funds for social programs in an economic system that is increasingly anti-social and irrational.

Why Are Pro-Social Alternatives to Taxation Rarely Discussed?

Canada is commonly presented as divided into official left- and right-wing politics. This division diverts the people away from analyzing issues concretely as they present themselves. Those on the left wing of politics are considered generally as pro-people and those on the right wing as pro-corporate. The Trudeau Liberal government presents itself as centrist whose job is to balance the official left and right wings of Canadian politics. To confuse and obscure any issue and avoid any concrete analysis, Trudeau presents both an official left- and right-wing option on all issues. This forms part of an extensive disinformation campaign or PR to fool the gullible and serve the private monopoly interests his government represents. Trudeau flashes sunny rhetoric and a mailed fist on the same issues such as the environment and pipelines, relations with Indigenous peoples, health care and transfer payments, the fascist Bill C-51 and other issues related to security, labour laws, committing Canadian troops and war materiel to the U.S. imperialist striving for global hegemony, etc.

With regard to funding of social programs and taxation generally the issue predictably falls into the left/right divide, which precludes any concrete analysis.

Faced with a shortage of public revenue, the left wing argues that higher taxes are the only way to sustain social programs and public services. The right wing argues for privatization, lower taxes, and cuts to social programs and public services so as not to discourage owners of social wealth from investing in the economy.

The situation in Alberta brings into focus how irrational the discussion has become over public revenue and its source. An NDP government is now in power and the province faces a serious public revenue deficit partly because of low oil prices translating into low royalty payments from energy resources. Alberta’s annual public revenue shortage is said to be approximately $10 billion. The deficit is $2 billion greater than the total amount of annual public expenditures for the K-12 education system. The tax system in Alberta, similar in most respects to other Canadian provinces and Quebec relies on personal income taxes, corporate taxes, royalty revenue from non-renewable resources, user fees, federal transfer payments, which themselves originate mostly from taxation, and less and less revenue coming directly from public enterprises. Alberta does not have a sales tax although people must pay the federal five per cent GST.

The current Alberta corporate tax is 12 per cent of net profits accounted by the companies themselves. A one per cent increase in corporate tax would possibly raise between $125 million and $225 million per year. To cover the current $10 billion annual shortfall, which of course would just maintain the status quo and would not represent an increase in spending on social programs, the corporate tax would have to increase by 50 percentage points to 62 per cent of net profits. The official left and right wings would never agree to such a percentage arguing that it would be impossible to implement as companies and investors would rebel upon seeing their return on investment fall below a rate acceptable to themselves.

This means personal income tax and user fees would have to increase along with the introduction of a provincial sales tax, according to official politics. A five per cent Alberta sales tax would generate between $5 billion and $8 billion per year depending on the economic conditions. Both left and right wings find the sales tax acceptable with two disagreements. The left wing argues the necessity to make the tax fair by compensating low income people with rebates, and the right wing would like a provincial sales tax applied mostly on articles of consumption and not means of production.

Both the left and right wings agree with personal income taxes. The left argues for a more dynamic progressive nature by taking more from high-income earners, and the right argues for lower taxes generally as people should fend for themselves rather than rely on a nanny state of social programs. Of course for the right wing, it argues that big companies should not fend for themselves as they need to be competitive in the global market and Canada has to compete for their presence with handouts from a nanny state for the rich.

For both the right and left wing, the state needs public funds but neither wing of official politics cares to discuss whether governments should radically change the taxation system by scrapping it altogether and starting afresh. This would entail governments openly and directly assuming their modern role as significant claimants of the value workers produce. Their claims would come directly from the value produced at enterprises on par with the claims of workers and the owners of invested social wealth. This would be a direct claim rather than an indirect tax on already claimed value of the working people and owners of social wealth, or on already circulating value. Taxing the money workers claim from selling their capacity to work or when they buy something has always been irrational. Likewise, the income tax on corporate net profits is an indirect claim on the value workers produce and easily manipulated to mostly disappear. These forms of taxation are out of date and serve to obscure the origin of value and the three main claimants of the value workers produce.

Also of great importance is the refusal of official politics to discuss charging enterprises directly for the commodities they consume from the social and material infrastructure as means of production without which they could not operate. More on this later.

The left wing argues that even though no one enjoys paying taxes, the people will pay them if they receive value in social programs in return, such as free hospital care and public education for children regardless of their family’s social or economic status. At any rate they say, if the people do not agree to higher taxes then the only alternative is to reduce social programs and public services, which is not palpable to most on the left wing. This approach and way of thinking represent a refusal to view the modern socialized economy as it presents itself, as a battlefield of two main contending social classes trapped within the social relation called capital. The refusal to analyze concrete economic conditions means in practice a refusal to challenge monopoly right and the class privilege and power of the dominant class within the dialectic.

The left and right wings of official politics and discourse never question the irrationality of how government claims its revenue. Instead of straightforward government claims on the value workers produce, the government uses increasingly incoherent and complex personal income taxes to make a claim on the claims of workers, corporate income taxes to make a claim on the claims of owners of the social wealth invested in an enterprise either as equity or debt, and then applies sales taxes and user fees when commodities are exchanged to make a further indirect claim. These taxes have spawned a huge unproductive accounting industry both to collect the taxes and avoid the taxes.

What if the people rejected all this nonsense on taxes from both the left and right wings of the ruling elite as anti-consciousness and a refusal to view the socialized economy as it presents itself. The workers produce value and claim a portion in exchange for their capacity to work. The owners of the social wealth involved in an enterprise claim a portion of what workers produce according to the amount of their investment. The government claims value directly according to its requirements. Objective claims on produced-value by those three main claimants require a wholesale sector under the control of a state authority within a government of laws where prices of production are determined scientifically. The ruling elite complain that such genuine reforms would intrude on their private interests, as a state authority would know the true story of a company’s accounts and intrude on their right to secrecy. But that is the point. The modern socialized economy is not a private affair; it concerns the security and well-being of all the people and the general interests of society. Reforms have to be taken to ensure the people affected by economic and political events can exercise control and oversight over those affairs that directly affect their well-being, security and future.

To defend their social class privilege, the ruling elite block genuine reform measures from being taken. They do not want claims on the socialized economy to be made objectively according to very specific formula. Monopoly right and class privilege defend their narrow private interests through obscurantism and disinformation, by refusing to allow any official discourse of the economy as it presents itself and any intrusion into their private business, which in essence is not private but very public as it affects the entire people and society.

The obscurantism and self-serving PR and disinformation campaigns of the imperialist rich block the development of a working class movement and thinking to solve problems and move the economy and society forward. It inhibits the development of a people’s front to curtail monopoly right, to deprive monopoly right of its power to refuse to be restricted and brought under the control of the people. Without smashing through the obscurantism and disinformation of official politics and relying instead on the capacity of the working class movement to analyze concrete conditions with its own thinking and independent politics, no progress can be made in solving economic, political and social problems and opening a path forward.

Exchanging Value Workers Produce in the
Social and Material Infrastructure

The present economic system requires the realization in exchange of produced commodities. This raises the question why commodities produced in the social and material infrastructure are not properly realized in exchange with enterprises that consume their value. If such an exchange and realization (sale) took place, much of the tax money presently collected would not be necessary. Money for extended reproduction of much of the social and material infrastructure would be collected in exchange for the commodities it regularly produces.

For example, the public health care enterprises and the public education enterprises in the provinces and Quebec should collect their own revenue directly in exchange for the commodities they produce, which consist mainly of the capacity to work of educated and healthy workers. The enterprises, both private and public that buy and consume workers’ capacity to work should pay for the health care and education of the workers, which they require to perform the work of the companies. The payment should go directly to the public enterprises producing the commodity and not through government, which in the present instance is acting on behalf of the monopolies as a gatekeeper and block to the proper realization of value. Workers in the public enterprises of the social and material infrastructure are quite capable of determining how much value they produce and how much their enterprises should receive in exchange for the commodities they produce, and how much more they need to produce to meet the needs of the economy, people and society.

Canadians suffer the regular spectacle of Quebec and the provinces arguing with the federal government over how much tax money should be transferred for health care, which is totally irrational. No need exists for the federal or provincial governments to be involved in realizing and distributing the value produced in the public health care and educational enterprises in Quebec and the provinces. Those public enterprises should be responsible to ensure that the value their health care and education workers produce is properly realized in exchange with the enterprises that consume workers’ capacity to work, and not just during their working lives but pro-rated on an average life span of a worker. The issue of proper realization in exchange for commodities produced by public enterprises throughout the social and material infrastructure should be put on the table, discussed and implemented. This would remove much of the pressure for taxation and the surrounding obfuscation regarding the economy.

Also, from an objective exchange of the value produced by public enterprise, it becomes obvious that public enterprises are the best and surest way for governments to raise public revenue for increased investments in social programs, public services, the vast scope of the social and material infrastructure necessary for a modern economy and for non-productive activities such as government itself, the police and military.

A public enterprise not only makes a claim on the value it produces for reinvestment back in the public enterprise but also makes some of its produced-value available for a sizeable government claim. The more a sector is de-privatized, the more the claims from owners of social wealth are reduced leaving more value available to meet the needs of governments and the general interests of society. For example in the health care sector, the creation of public pharmaceutical and hospital supply enterprises would eliminate the enormous claims and control of owners of social wealth throughout the health care system. The same could be done in the production of roads, bridges and other commodities of the material infrastructure. This would allow enormous social wealth to be available to solve the economic, political and social problems confronting the country, not to speak of opening up space and possibilities for empowerment of the working class. In this way the actual producers can activate themselves to play their necessary role at the centre of modern life in control of their work, means of production, economy, politics and society.

(To be continued: Learning to look at the entire economy and the value workers produce as a single sheet of steel, a single whole from which claims are made by the three main claimants — workers in exchange for their capacity to work; governments to serve the general interests of society; and owners of enterprises in exchange for the use of their social property and other wealth.)

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