The Cooperativist Manifesto

6. SOCIETY'S ROLE IN THE PRODUCTION OF WEALTH

Since infrastructure is a productive factor of wealth, part of the residual profits conceptually belong to society as compensation for the use of infrastructure. The State owes a duty to its citizens to use the revenues it receives on account of infrastructure to further enhance the production and fair distribution of wealth.

Economic justice requires that residual claimants compensate society for the contribution made by infrastructure to the productive process. The actual value of a systemic factor of production may be difficult to determine in many instances. Nonetheless, income taxes can be viewed as the collective's entitlement to part of the residual gains derived by business. In other words, income taxation represents a form of compensation for the commercial enterprise's use of infrastructure.

Our progressive tax system embodies, at least implicitly, the principle that taxes on the residual profits of economic production constitute compensation for the public's participation in the production of wealth. The rise of technology means that tax authorities around the world will have a greater - not diminishing - role to play in fostering economic growth.

Once we view income taxes as an inherent claim of society, then the arbitrariness of their imposition by the State may be more palatable. We can better appreciate the anger and emotions that workers experience when wealthy capital owners avoid payment of their "fair" share of taxes, particularly since this group receives favourable treatment under the capitalist system. We can also infer that when individuals and households state that "taxes are too high", they mean that the system's contribution to the production of wealth, relative to the varying contributions of labour and capital to the production of wealth, is less than the value of the wealth being taken out of the system in the form of taxes. Witness the prevalence of tax revolts during recessions.

It is widely believed that the State possesses the duty to afford its citizens the opportunity to pursue a minimum standard of living. Over the long term, most individuals and households will be unable to maintain a decent standard of living unless they participate in the production of wealth as a residual claimant. Governments must prevent the enactment of commercial laws and the entrenchment of private intellectual property rights that effectively encourage capital accumulation through appropriation of labour's rightful share of the residual profits of wealth creation.

Where the State receives tax revenues as compensation for its contribution to the production process, the State has the corresponding obligation to ensure the fair distribution of productive wealth. The State must impose and collect income taxes in a fair and equitable manner consistent with the cooperative model of employment relationships. Tax rules need to recognize the unique contribution of labour in the production of business income. States must also utilize tax revenues in a manner that corrects disparities in wealth. Government transfers to the poor can be designed to promote economic efficiencies through redistribution. By eliminating or reducing imbalances and biases against workers, the State will advance the aggregate utility of the collective.