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Susan Green

You Have to Be Rich
to Know How to Avoid
Paying Your Income Taxes

(16 March 1942)

From Labor Action, Vol. 6 No. 11, 16 March 1942, p. 3.
Transcribed & marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

When the readers of Labor Action get this issue, they will just have filed their income tax returns and paid the piper. That is, if they are among the “wealthy” workers earning $15 a week if single or $30 a week if married.

They, like all the little people on whom rest the burdens of the war, will not have employed any lawyers or accountants to figure out their tax. So much earned, so much left to he taxed. It’s as simple as all that for the Jimmie Higginses of the country whose income tax payments will deprive them of necessities of life. The income tax law which every Jimmie Higgins was obeying on March 15th is supposed to play no favorites. Everyone is supposed to be taxed on the same basis as everyone else – all equal before the law. Says who!

The government has reached into the pockets of the poorest workers by this income tax law – which reach will go even deeper next year. At the same time it has eased up on the biggest money makers and war profiteers.

The newspaper PM recently published an eye-opening comparison between the excess profits taxes today and those of the First World War. Today, for instance, a corporation with $10,000,000 invested and making $2,000,000, or 20 per cent profit, pays a normal excess profits tax of only $39,250. In 1918 the excess profits tax under similar circumstances was almost, ten times as much – $359,100.

The war profiteers who are presumably taxed at the highest rate, nevertheless get away with more loot now than in the last war. Profiteering profits taxable at $797,600 during the last war, in 1942 are taxable at only $701,000 – or 11 per cent less. On the other hand, workers earning $15 or $30 a week, in 1918 considered too poor to be taxed, are now given, the dubious honor of being income taxpayers. Thus have the “democratic processes” expressed themselves in the tax law.

Outwitting the Taxes

A worker has no way of outwitting the law. He earns so much and the boss reports it to the government. But the boss corporation has its standard tricks, and corporation lawyers and accountants constantly think up new ones.

A good old stand-by is to pass taxable excess profits over to the corporation big shots in the form of increased salaries. For instance, in 1940 W.B. Jarvis Co. handed one officer a “small” increase from $17,540 a year to $80,000. Again, the biggest salary paid by Bethlehem Steel jumped from $271,000 a year to $478,000. American Rolling Mill Co. raised a $76,000 salary to $106,000. Of course, these salaries are taxable – but not at the excess profits tax rate. So the law gets the run-around by those very bloated corporations which it handles with kid gloves.

But the most maddening instances of inequality in the tax law are contained in some of the “innocent” provisions that are more or less taken for granted.

Such a one is the right of the corporation to deduct “deficits.” The law provides for the payment of excess profits taxes, on the basis of average earnings over a period of years. But if the corporation had “deficits” – real or imagined – during that period, deductions are made, taxable income is thereby reduced, and the corporation’s taxes are slashed accordingly.

Our Deficits and Theirs

But what about the “deficits” of the workers? What about the weeks, months and years of unemployment! Workers have been “in the red” ever since the depression. Why should they not be credited with their loss of employment over a period of years!

The tax law makes no allowances for “deficits” in wages as it does for “deficits” in profits. Here we see revealed the real kernel of the capitalist system. The law stands on the capitalists’ inalienable right to continuous profits. But it does not even recognize the workers’ right to earn the means of life day by day, week by week, year by year.

Another “innocent” provision of the tax law allows corporations to deduct huge amounts from profits for depreciation, obsolescence, depletion, repairs and replacements. Profits are thus further artificially reduced for tax purposes.

A corporation may take off for wear and tear up to 20 per cent of the value of machinery as well as amounts for buildings, trucks, etc. Additional deductions are made far obsolescence when new inventions make old machinery no longer “stylish.” A mining corporation may deduct from profits the value of the “using up” of the natural resources. And repairs and replacements are thrown in for good measure.

And the Worker?

What about the worker! There is plenty of wear and tear on the human machine. Steadily the worker is depleted of his power to labor. As he gets older he is threatened with “obsolescence” and is finally supplanted by a younger worker. Why should allowances not be made for the using up of the only “property” the worker possesses – his power to labor!

Nor does the income tax blank provide deductions for doctors’ bills for “repairs” in the form of illnesses and operations; nor for “replacements” in the form of such things as eye-glasses, dental work, etc.

None of these items of vital value to the workers are deductible from his wages for income tax purposes. Why not? Because the law – along with so many other laws of the land – adhere to the basic capitalist principle that property is sacred and workers’ lives cheap.

ALL equal before the law – Says who!

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Last updated: 16 February 2014