Why are we taxed ?

(Part 4)

The abolition of taxes cannot be accomplished within the framework of a financial system which is not in accord with realities. But when finance faces up to realities and suits itself to realities taxes can be dispensed with; that is to say, when a financial system is constructed about Social Credit principles. Consequently, it is necessary to have a clear view of the totality of principles which have given rise to Social Credit before we can have any true appreciation of the possibility of abolishing taxes, which abolition would be automatic upon the realization of Social Credit in our society.

Economic realities

The two important facets of economic realities are: on the one hand, human needs; on the other, the goods and services which will meet these needs and satisfy them.

The goods (and when we speak of goods we also include services) which will satisfy these needs constitute wealth. Whether it is a question of goods destined for private consumption, like food, clothing, etc., or a matter of goods destined for public consumption, like roads, schools, water systems, etc., the production of such goods constitutes true "enrichment", while the destruction of such goods in any manner constitutes true "impoverishments", in the strictest sense.

A country, then, becomes rich when it produces more goods than it destroys. This is normally the situation in countries which are well advanced and are equipped with the most up-to-date methods of production. Modern countries today will normally produce more durable goods (roads, plants, etc.) than it will use up - always providing that they are not afflicted with the cataclysms of war or of the forces of nature. And as far as consumer goods are concerned, they cannot for long consume more than they produce.

The issuance and cancellation of credit

Our modern society has learned to make use of a very simplified form of money, the money of accounting by which credit is exchanged by means of cheques which transfer this credit from one account to another. It is true that paper and metal money have not been entirely suppressed, but they form only an insignifiant percentage of the actual monetary dealings of the business world today.

Money and credit are interchangeable. It is only necessary to stand before a wicket in a bank for a few minutes to be convinced of this fact. Consequently, we use the term "credit-money" in setting forth the following financial principle which stems from a system which is in harmony with realities:

All new production should be financed by new credit-money. And this credit-money should not be withdrawn or cancelled except in the measure that the wealth produced is destroyed or depreciates.

So we see that with a system of finance which is healthy and which conforms to the reality of facts, it is production — or the capacity and the will to produce — which determines the flow of credit-money. It is not money which should determine production or its rate.

Whatsoever is physically possible of production should also, automatically, be financially possible. Otherwise, finance is no longer in accord with realities. It becomes an obstacle instead of an aid.

So it is manifestly absurd for a community of human beings to abstain from producing goods which it needs, wants and can produce simply because of a lack of financial means. To do so would be to submit to a system of finance which falsifies realities and penalizes men instead of serving them.

Since, from one year to the next, the production of true wealth in a country which possesses modern equipment and techniques is greater than the consumption of such wealth, the public accounting of such a country should show a growing credit rather than an increasing public debt.

And since the wealth of a country exists for the people of that country, it follows that a country which has an ever-increasing credit or capital should issue to its citizens a dividend for each one, rather than diminishing, through taxation, the right of the citizens to share in the production of their land.

If finance were a true and faithful mirroring of realities, financial credit would be simply a financial expression of real credit.

The real credit of a country, the true base of the confidence which is had in that country, is that country's ability to produce and deliver the goods which are called for by needs. The greater a country's capability to satisfy, quickly and easily, the expressed needs, the greater is the confidence of its inhabitants (or those who will become its inhabitants) in that country. In other words, the greater is its credit.

The financial credit of a country should be nothing else but the expression, in credit-figures, of this real credit.

So again we come to an absurdity — that a country's credit should consist in its ability to furnish dollars to the financiers. The world was not created for the financiers.

If finance were a true and exact reflection of facts, and if finance were a true servant of the community, any and every capacity to produce would be expressed by the capacity to pay!

With a financial system conformed to reality, the problem of paying does not exist as long as the problem of producing does not exist.

In the service of human needs

But finance should also be something more than an expression, in accounting, of production; it should also be a mechanism for the distribution and sharing of the goods necessary to fill the needs of men. It should provide purchasing power to those who have needs. Otherwise, there can be no conjunction between needs and goods.

And here we touch upon the social. It is not outside the limits of the matter under consideration to recall that the riches of the earth were created for all men, and that each and every individual, in one way or another, should have sufficient of these goods in order to be assured of a decent living. In our modern society the only way to insure to each one that minimum of goods is to insure and guarantee to each an amount of purchasing power which will enable him to procure this minimum of production. No individual can, by himself, produce for himself all the goods he requires to satisfy his needs. Each one has need of the goods produced by others. And in order to obtain the goods produced by others, each one must have that with which to pay for this production, purchasing power.

A financial system in conformity with reality must, then, not only issue new credits for all new production, but it must also distribute purchasing power to each and every individual.

This purchasing power cannot be distributed exclusively through the channel of wages and salaries, since not everyone is in receipt of wages and salaries.

Social Credit foresees the distribution of purchasing power through a periodic dividend issued to each an every individual.

Progress is making it possible to produce more and more with less and less need of direct human intervention; that is, with less need of "employees". Progress is thus tending to disassociate production from employment. That is why, in a system of finance in conformity with reality, the right to produce, that is, purchasing power, should in the same measure be disassociated from employment. The greater the decrease in the number of those working for wages and salaries, because of progress, the greater should be the increases in the dividend.

The adjustment of prices

A finance working in harmony with realities would also have the function of adjusting the sales price with the cost price, or the true price.

What is the true price of something — the cost price? It is everything which it is necessary to make use of in order to produce the thing. It is everything that is changed into this thing. It is everything which, as such, disappears, or is consumed, because of the manufacture of this thing which has been produced and is being sold.

For example: we build a bridge. The wood, the iron, the cement, etc., all cease to exist as things apart by themselves. They become one with the bridge. Other things likewise disappear because this bridge was built. All the consumer goods: the food, the clothing, the medicines, the little luxuries and entertainments bought by the men who received salaries or wages as a result of working on the construction of the bridge, these likewise are part of the cost of constructing the bridge. So we might say, with complete accuracy, that the true price of the things is the sum total of goods which were consumed through the construction of this bridge, because this bridge was built.

It is in this sense that we say: the real cost of production is consumption.

So we see that, for finance to be in accord with realities, the total sales price which the consumers of a country will pay for the production of that country in a given period, should not exceed the total value of what is consumed in the country for that same period. If, for example, the country produces 30 billions of dollars worth of goods, in one year, while the citizens of the land, during that time have consumed only 20 billions of dollars of produce, then the citizens should be able to procure the 30 billions worth of new produce for 20 billions of dollars. Yet the producers must recover their 30 billions of dollars. If they do not, they will go into bankruptcy. We can see then how it becomes necessary to adjust constantly the sales prices of goods to the true cost price of these goods. And we see, too, that the producer must be compensated for that amount which is not paid by the consumer.

(To be continued)