Profit as a 'tax'

Have you ever tried to explain to skeptics of socialism that profit itself is a type of tax? It seems like some people in the US might be more receptive if they realized they are being 'taxed' well above the cost of production of the things they buy. It might be easier for them to visualize it in terms of a tax, which they hate.

Official response from submitted

This is an excellent idea. Profit is indeed like a tax only levied by a private entity, not the government. Like a tax it represents a portion of the value produced by a person's labor that is not received by the producer (neither individually nor as a member of the collective of producers) but instead delivered to someone else, a non-producer. Then too, where tax is extracted under threat of legal force, profit is extracted under threat of unemployment where employer has not responsibility for social consequences of firing workers who do not deliver what employer deems to be adequate profit. I will work on this. Thanks for the idea!


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  • commented 2016-12-03 13:49:10 -0500
    You and others already do a great job of explaining this from the perspective of the worker vis-a-vis the employer. But the thing that persuades the average person in the U.S. – even the working person herself – is the argument to them individually as consumers. The proposition that ‘the market solves the problem’ is a sort of ‘best of all possible worlds’ argument in the style of Voltaire in Candide. The result is that the individual adopts theoretical macro-economic policy positions where she has limited expertise, instead of using a more concrete cost-benefit analysis. This argument has three flaws as I see it, but mind you, I’m not an expert, that’s why I’m hoping you can do something with it:

    1) Consumers are not a uniform group. Different people are consumers of different products. They also have vastly different levels of consumption.

    2) The justification for market determination of price is the argument (which most people I encounter strongly believe) that competition drives producers to equilibrium, which is zero profit. That clearly does not occur.

    3) There is no way for the average consumer of any given product to measure the difference – or even SEE the difference – between the cost of production and the market price. All a person can do is compare the market prices of the different available products. (This disconnect is also actually true for taxes – an individual doesn’t have a simple way to compare the level of taxes they pay to the actual cost of the government services being provided.)
  • tagged this with good 2016-12-03 13:49:10 -0500
  • responded with submitted 2016-11-25 09:06:04 -0500
  • published this page in Ask Prof. Wolff 2016-11-18 00:38:50 -0500

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