V. I.

Lenin

Novy Ekonomist (No. 21 for 1913), a journal published by
Mr. P. Migulin, with the Octobrists and Cadets jointly collaborating,
carries an interesting note about income tax in the United States.

The bill exempts from taxation all incomes up to 4,000 dollars (8,000
rubles). Taxation is envisaged at the rate of one per cent on all incomes
exceeding 4,000 dollars, two per cent on all incomes exceeding 20,000
dollars and so on, with slight increases in the percentage as incomes
increase. Thus the plan is for a progressive income tax, but with an
exceedingly slow rate of progression, so that the owner of a mil lion
dollar income generally pays less than three per cent.

The plan estimates that the 425,000 people whose incomes exceed 4,000
dollars will pay 70 million dollars in taxes (about 140 million rubles) and
the Octobrist-Cadet editors of Novy Ekonomist note with reference
to this:

“ Compared with the 700 million rubles import duty and the 500 million rubles excise duty, the expected revenue of 140 million
rubles from income tax is negligible and will not change the significance
of indirect taxation.”

It is a pity that our bourgeois liberal economists who are in words
prepared to accept a progressive income tax and have even recorded it in
their programme, have evinced no desire to make a definite and precise
statement on what rates of income tax they consider to be
obligatory.

Such rates that the significance of indirect taxation would merely be
changed, and if so to what extent? Or such rates that indirect taxation
would be completely abolished?

The American statistics that Novy Ekonomist touches upon
provide an instructive illustration to this question.

It can be seen from the bill that the total income of 425,000
capitalists (if the tax provides 70 million dollars)

is estimated at 5,413,000,000 dollars. This is an obvious understatement; a
hundred persons are shown as having an income of over a million
dollars and their income is shown as 150,000,000 dollars. We know that a
dozen American multimillionaires have incomes incomparably
greater. The Secretary of the Treasury in America wants to be “polite” to
the multimillionaires....

But even these figures, excessively “polite” to the capitalists, show
a noteworthy picture. Statistics in America record only 16,000,000
families. Of these, therefore, less than hall a million are
counted as capitalists. The remaining mass of people are wage-slaves or
petty farmers oppressed by capital, etc.

The statistics fix the size of the income enjoyed by the working masses
in America quite accurately for a number of categories. For instance,
6,615,046 industrial workers received (in 1910) 3,427,000,000 dollars,
i.e., 518 dollars (1,035 rubles) per worker. Then, 1,699,420 railway
workers received 1,144,000,000 dollars (673 dollars per worker). Further,
523,210 public school-teachers received 254,000,000 dollars (483 dollars
per teacher).

Combining this mass of working people and rounding off the figures we
get: workers—8,800,000 with a total income of 4,800,000,000 dollars or
550 dollars each; capitalists—500,000 with a total income of
5,500,000,000 dollars or 11,000 dollars each.

Half a million capitalist families receive an income that is
greater than that of almost 9,000,000 workers’ families. What,
might we ask, is the role of indirect taxation and of the planned income
tax?

Indirect taxation brings in 1,200,000,000 rubles, i.e., 600,000,000
dollars. The amount of indirect taxation is 75 rubles (37.50 dollars) per
family in America. Let us compare the way in which the incomes of
capitalists and workers are taxed:

| | Million families | Total income | Total indirect taxes | % of income paid as taxes |
| --- | --- | --- | --- | --- |
| (million dollars) |
| Workers . . . | 8.8 | 4,800 | 330 | 7 |
| Capitalists . . . | 0.5 | 5,500 | 19 | 0.36 |

We see that the workers pay seven kopeks to the ruble in indirect taxes
while the capitalists pay one-third of a kopek. The workers pay,
proportionally, twenty times more than the capitalists. A system
of indirect taxes inevitably creates such an “order” (a very disorderly
order) in all capitalist countries.

If the capitalists were to pay the same percentage in taxes as the
workers, the tax imposed would be 385,000,000 and not 19,000,000
dollars .

Does a progressive income tax of the sort planned in America
change much? Very little. From the capitalists 19,000,000 dollars indirect
taxes plus 70,000,000 dollars income tax would be obtained, that is,
altogether 89,000,000 dollars or only one and a half percent of income !

Let us divide the capitalists into middle (income 4,000 to 10,000
dollars, i.e., 8,000-20,000 rubles) and wealthy (with an income over 20,000
rubles). We get the following:
middle capitalists—304,000 families with a total income of 1,813,000,000
dollars, and wealthy capitalists—121,000 families with a total income of
3,600,000,000 dollars.

If the middle capitalists paid as much as the workers pay, i.e., 7 per
cent of income, the revenue would be about 130,000,000 dollars. Fifteen per
cent from the income of wealthy capitalists would produce 540,000,000
dollars. The total would more than cover all indirect taxes . After
the deduction of this tax the middle capitalists would still have an income
of 11,000 rubles each and the wealthy an income of 50,000 rubles each.

We see that the demand put forward by the Social-Democrats—the
complete abolition of all indirect taxes and their replacement by
a real progressive income tax and not one that merely plays at it—is
fully realisable. Such a measure would, without affecting the
foundations of capitalism, give tremendous immediate relief to nine-tenths
of the population; and, secondly, it would serve as a gigantic impetus to
the development of the productive forces of society by expanding the home
market and liberating the state from the nonsensical hindrances to economic
life that have been introduced for the purpose of levying indirect taxes.

The capitalists’ advocates usually point to the difficulty of assessing
big incomes. Actually, with banks, savings societies, etc., at their present level of development, this is a purely imaginary
difficulty. The one difficulty is the class-avarice of the
capitalists and the existence of undemocratic institutions in the political
structure of bourgeois states.

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