Private capital and taxation

Private Capital in the USSR -1927
State publishing house

Translated from the Original- no omissions

Private capital and taxation

Private capital in national property and annual accumulation.

Private capital in national property and annual Accumulation.

All the property of our country, private and state, for 1926/27, according to the calculations of the State Planning Commission, is about 54.5 billion rubles (p. 313 of the Control Figures). Here, all material values are taken into account ‐ all buildings, livestock, inventory, equipment, etc., except for commercial capital only (and apart from consumer goods that are in the personal use of residents, such as furniture in apartments, etc.). By commercial capital we must mean mainly commodities of all kinds that are in the process of circulation: the grain that has already been sold by the peasant, but has not yet turned into a roll already bought by the city dweller; that matter that has already been released from the factory, but has not yet turned into clothes for the consumer, etc. The Narkomtorg estimates the amount of the countryʹs trading capital at least 5.5 billion red rubles (see above, in the section on trade). The entire amount of national property is thus estimated at about 60 billion chervonny rubles. (except for consumer goods already in use by residents).

The value of private capital, including, as already indicated, must be distinguished from the value of all private property. The latter also includes the property of non‐capitalist private economy (middle and low‐power peasants, handicraftsmen, liberal professions, peddlers selling from kiosks, small house owners, etc.). We do not include all this in the calculation of private capital. The calculation includes only the definitely capitalist part of the peasants (about 450 thousand families, or 1.56% of the population of the USSR, counting 5 souls in a

family) and the capitalist commercial, industrial and money bourgeoisie (about 180 thousand families, or 0.5% of the population USSR, counting 4 people per family according to the coefficient of the 1923 city census for this group). Thus, in total, almost exactly 2% of the population of the USSR belongs to capitalists of various sizes, including family members (about 630,000 people in total).

The average size of the capital of these capitalists is rather modest in comparison with foreign capitals. The capital of non‐ agricultural capitalists is (as of October 1, 1927) about 1,600 million rubles, or about 4.5% of the countryʹs non‐agricultural property. The capital of agricultural capitalists is about 2 billion rubles. or about 8% of the countryʹs agricultural property (I take the figures for the countryʹs property from the ʺControl Figuresʺ of the State Planning Commission with the addition of trading capital according to the calculation of the Peopleʹs Commissariat of Trade). In general, therefore, about 2% of the population now owns about 6% of the national property. It goes without saying that there is not a single state in the world where the capitalists would own such a relatively small part of the national property.

The average size of capital and the average size of the annual net accumulation for 1926/27, as shown in the previous sections of this work, can be roughly taken in such values:

a) for non‐agricultural capitalists (commercial, industrial, and monetary bourgeoisie) ‐ an average capital of about 9 thousand rubles. per owner and annual net accumulation of about 1400 rubles. per owner, or 15.5% on capital on average;

b) for agricultural capitalists (the kulak part of the prosperous peasants), the average capital is about 4,500 rubles. per owner and annual net accumulation of less than 300 rubles, or about 6.2% of the average capital.

Of course, such comparatively modest figures are obtained only if we take capitalists, both small and large, together. The memorandum of the Narkomfin on the state of taxation cites, for example, the distribution of taxable income to the commercial and industrial bourgeoisie (of course, without concealed income from private capitalist credit, from currency speculation, pawnshop operations, etc.—see the section of this book ʺPrivate capital on money and credit market). If we take only the circle of owners that I include in the composition of the capitalist stratum (i.e., without the first and second tax categories for merchants and industrialists), then the tax data of the Narkomfin, according to p. 37 of his memorandum, give the following result:

	Number of owners	Taxable income
1924/25	170 thousand	438 million rubles
1925/26	174 thousand	630 million rubles

But including the small upper group (24 thousand people in 1925/26) in the first of these two years accounted for 24% and in the second even 31% of the income taxed by the Narkomfin of this commercial and industrial bourgeoisie (the same report, p.

.37). If we also recall that virtually non‐taxable income from private credit capital is also concentrated mainly in the hands of the same upper group, then from the ʺstatisticalʺ figure of the

ʺaverageʺ capitalist with a capital of 9 thousand rubles. it will be possible to approach a more realistic picture of those about 25,000 Nepmen who have one more annual income and who in fact are the main owners, collectors, and managers of the countryʹs non‐agricultural private capital (and some of the threads ‐ through procurement, etc. ‐ extend from them to agricultural entrepreneurs). According to the Commission of the Council of Peopleʹs Commissars of the USSR for the study of the severity of taxation (working in June‐July 1927, consisting

of M. Frumkin, L. Kritsman, Yu. Larin, S. Strumilin, etc.), in 1925/26 in the USSR about 25 thousand large capitalists received about 400 million rubles. income (in excess of expenses for their enterprises), that is, more than 16 thousand rubles. per family per year.

It should be noted that the greater profitability of exploiting non‐agricultural capital compared to agricultural capital (an average annual net accumulation of about 15% and about 6%) is not a new or unexpected phenomenon. Capital circulates much more slowly in agriculture than in other branches. Therefore, despite the much more significant exploitation of hired labor there (compared to industry), the percentage of annual capital accumulation turned out to be lower in agriculture than in industry, and in pre‐revolutionary Russia (for more details, see my book ‐ ʺThe Economy of the Pre‐Soviet Villageʺ, M., 1926, chapter on “Wage labor in agriculture”).

Here, in the post‐revolutionary USSR, both of these phenomena have been preserved. Firstly, the lower annual return on private capital in agriculture compared to its “urban” occupations (from this follows the tendency to grow into non‐agricultural capitalists—the organization of rural processing industrial enterprises by the kulaks, usury instead of developing their own agricultural products, etc.).

Secondly, there is a greater exploitation of wage‐workers in capitalist agriculture than in capitalist industry (hence the necessity of intensifying our attention to the protection and organization of labor precisely in agriculture).

In the section on industry, we saw that wages in private industry are even somewhat higher than in state industry (the intensity of work is also higher).

But if we compare the rate of growth (rate of increase) of nominal wages in private agriculture and in state industry, a

great backwardness is revealed not only in absolute, but also in relative growth, even in comparison with state industry, to say nothing of private industry.

In No. 5 of the Statistical Review for 1927, data are compared on the growth of wages among agricultural workers hired by peasants on a daily basis (according to reports by about 30,000 local correspondents of the CSB) and the wages of industrial workers. With daily wages, according to these data, the peasants hire an average of about 60% of farm laborers, and with haymaking, reaping and harvesting, even 72%.

According to these data, it turns out that when compared with 1923/24, over the next two years together (1924/25 and 1925/26), the nominal wages of industrial workers increased by 45%, and agricultural laborers only by 34%. (p. 47, ibid., article by comrade Kizyaev).

The Gosplan defines the entire net annual accumulation of the country for the last year at 2,100 million rubles. (p. 313 of the Control Figures), again without the accumulation of commercial capital (state, cooperative and private). With him, this value should be taken up to 2,700 million rubles. The entire net annual capitalist accumulation, as we have seen in the relevant sections, amounts to about 125 million rubles in agriculture. and in other industries about 250 million rubles, and in total about 375 million rubles. This amounts to 13.9% of the countryʹs total annual net accumulation, of which 4.6% is accounted for by the peasant kulaks and 9.3% is the participation in the ʺnationwide accumulationʺ of other capitalists.

As a result, we get that about 2% of the countryʹs inhabitants (the capitalist part of the population) own 6% of all property, almost 10% of all income, and collect almost 14% of the total balance that the country accumulates as a result of its annual

labor. Such is the material basis (basis) for the taxation of private capital, to which we must now pass.

Of course, there is nothing surprising in the fact that the capitalists, having only 6% of their property, collect twice as much of their annual accumulation—thatʹs why they are capitalists. Even if income were distributed according to the property of each class of the population, the share of capitalists in net accumulation would turn out to be greater, because they are few in number. Therefore, an income proportionate to property would nevertheless enable them to accumulate a greater percentage. This should be all the more so when the property of the capitalist brings him a relatively greater income per unit, for he still uses his property for the exploitation of the labor of others.

Before the revolution, approximately 85% to 90% of the total annual net accumulation of what was then Russia went to the capitalists and landowners. We have already reduced the share of the exploiting elements in the national accumulation by six times. This tremendous achievement of the proletarian revolution in the USSR will be felt in practice to an ever greater extent in proportion to the absolute growth of our economy.

In the first years after the end of the war (i.e., starting from 1921), it did not make itself felt enough due to the fact that the countryʹs economy by that moment had generally fallen extremely low under the influence of military ruin (up to 20% of industrial output and up to 50%, ‐ in agriculture).

All funds were fully invested in filling the pits that had formed, and no special effects were yet observed in comparison with the pre‐war economic level. The sixfold reduction in the share of the exploiters in the annual national accumulation had an effect in these years in a different way.

Namely, at a particularly accelerated rate of raising the countryʹs economy to the pre‐war level, which was not expected, not only by enemies and friends, but even by most of us ourselves. Now, after reaching the pre‐war level in 1926/27, a sixfold reduction in the share of the exploiters in the national accumulation gives us the possibility of especially large and ever‐growing gains over the pre‐war level.

If we manage to avert for at least a few more years the danger of a war that is being prepared against us, led by conservative England, then our successes in technology, prosperity, culture, and power will far leave behind everything we have achieved. This, of course, is precisely what pushes the desperate leaders of imperialist capitalism into military adventures in which, we hope, if it comes to them, they will also find their own ultimate destruction. It goes without saying that any attempt on their part to extend a military ʺhelping handʺ to the chances of developing private capital in our country can only produce the opposite result. For the economic conditions of warfare in the present situation inevitably require more stringent planned regulation than peacetime relations. This has been confirmed by the experience of even the bourgeois states during the last World War (see my book, State Capitalism. The military economy of Germany in 1914‐1917, M., 1927). This is all the more undoubted in our country because of the class characteristics of our economy and our state.

Now, in peacetime conditions, one of the main and fundamental ways of regulating the accumulation and activity of private capital is the imposition of taxes (including tax‐like payments, such as higher rents for capitalists, etc.). The above net annual accumulation remains with the capitalists after all taxes have been paid. We must compare the amount of taxes paid by the capitalists and the ratio of these taxes to income with capitalist accumulation, and also dwell on those features

of taxation that require the adoption of appropriate measures. For all this, it is necessary, first of all, to give yourself at least a schematic account of the distribution: in the USSR, according to the social classes of the population, income, and taxation in general.

Classes, incomes, taxation.

The latest summary of available and conjectural data on the distribution by class of population, income and taxation is the work done in the Narkomfin for 1925/26, published in large extracts by Comrade Rzhevussky in Nos. 4 and 5 of the Economic Review for 1927 and which is a memorandum on the severity of taxation. According to these data from the Narkomfin, the entire amount of taxation of the population for 1925/26 is about 2,330 million rubles. This includes all the budgets of the USSR, the Union republics, and localities, including village councils (minus non‐tax turnover receipts, for example, railway fares), all so‐called voluntary fees, the entire tax part of tax‐like payments (for example, apartment and school fees from the highest ranks, rent for commercial premises from private traders, etc.), peasantsʹ insurance payments, etc.—in a word, everything.

At the same time, excises, customs duties, trade tax and various other payments, which are usually transferred by payers to buying consumers, are spread out among all segments of the population in proportion to their consumption. I consider it possible to use this calculation of the absolute amount of taxation as the most complete and most verified, despite some of its obvious shortcomings, which exaggerate the real taxation of agriculture against reality.

So, firstly, the agricultural tax is assumed to be completely non‐ transferable to the consuming population. This, of course, is not true. Since the peasants sell about a quarter of all agricultural

products to the towns (see Section Three of this booklet), a quarter of the agricultural tax is also passed on to the townspeople in the price of the products sold. In addition, another quarter of agricultural production is sold inside the village by more prosperous groups of peasants to less prosperous ones (see ibid.).

Finally, for some reason, the comrades who drafted the Narkomfin report included voluntary fees for hiring a village shepherd, for a public producer for herds (a bull), for a public gorodbo of fields.

All this (unlike some other ʺvoluntaryʺ fees) is not taxes at all, but the normal costs of running a household. In addition, part of the excises and other imposed taxes is incorrectly attributed to the taxes paid by the agricultural population (by about 30 million rubles). It is precisely their share that is paid by part of the rural handicraftsmen and summer otkhodniks (water workers, builders, etc.).

This is that part of the handicraftsmen and otkhodniks who derive the greater part of their family income not from agriculture, but from their trades, and who spend most of the year (and in particular the summer) not in agriculture, but in industry, construction, and transport. Together with family members of this population, there are up to 7 million people. (of these, about 2.5 million people should be counted among the non‐agricultural working population, and up to 4.5 million people should be counted among the non‐agricultural petty bourgeoisie, i.e., the non‐agricultural private labor economy).

Accordingly, instead of 115.2 million people. agricultural population adopted by the Narkomfin for 1925/26, in fact it should have been only 108.25 million people. In addition, out of the total taxation of 2,330 million rubles, according to the Narkomfin, about 160 million rubles. falls on the ʺsocialized

sectorʺ, that is, on taxes from various government agencies (and partly from cooperation).

This amount was not distributed by the memorandum of the Peopleʹs Commissariat of Finance among the classes, which is wrong. For taxes from state bodies in favor of the state have the character of only a redistribution through the budget between state bodies of funds essentially collected from the population.

Therefore, these 160 million rubles. we distribute between the agricultural and non‐agricultural population in accordance with the data of the Narkomfin on the sources of their receipt.

Making an allowance for the correction of the size of the agricultural population, for the transfer of a quarter of the agricultural tax to the non‐agricultural population, for the exclusion from the tax collection of the above expenses for the shepherd, bull and gorodba, and for taking into account the corresponding part of the “socialized” 160 million rubles, we get the entire taxation of the agricultural population about 830 million rubles instead of the 930 million rubles calculated by the Narkomfin. Accordingly, the total taxation of the non‐ agricultural population is about 1,500 million rubles. Thus, out of the total real taxation of the population in 1925/26, agriculture accounted for about 35.8% and for those employed in other industries, about 64.2%, almost two‐thirds.

As regards the distribution of the population into social groups (social classes), in addition to the above amendments, two more must be made. Firstly, I also count among the proletariat the unemployed, daily workers and domestic servants registered in the cities (these groups are shown in the Narkomfin summary report in the rest of the urban population, ”but, according to the materials kindly delivered to me, they can easily be singled out and ranked among the rest of the non‐ agricultural workers and employees). In this regard, the

average annual income of all workers and employees, accepted by the Peopleʹs Commissariat of Finance for 1925/26, was 318 rubles. per one consumer (counting those who work with their dependents), should be reduced to 275 rubles. per capita (this means a real taxation of 14.8% instead of 13%, calculated in the Peopleʹs Commissariat of Finance without this amendment and without an amendment for the transfer of a quarter of the agricultural tax). The number of the entire non‐agricultural working population of the USSR turns out to be about 24 million people.

The second amendment relates to the size of the non‐ agricultural petty‐bourgeois population. From other categories I transfer here, firstly, as already mentioned, 4.5 million people. rural, predominantly commercial population, for which the occupation of any of the family members by agriculture, when it takes place at all, has the value of only an auxiliary, secondary source of income. Secondly, according to the detailed calculations of the Narkomfin report delivered to me, I transfer to this group from other groups of the Narkomfin also merchants of the first and second tax categories (pedlars, kiosks), small homeowners, pensioners, non‐employed persons of free professions, beggars and generally declassed, etc. The total non‐agricultural petty‐bourgeois population will thus amount to 10 million people, with an average income of up to 350 rubles. per year per capita (taking into account, among other things, ancillary natural and other income from agriculture for those partially engaged in it). The severity of taxation here reaches almost 10% of income (more precisely, 9.7%). The redistribution of various groups of rural handicraftsmen, summer otkhodniks, the unemployed, small merchants, servants, day laborers, homeowners, freelancers, etc., between various social categories (proletariat, petty bourgeoisie), which I accept, has already been approved on July 1, 1927 by a government commission on verification of the

severity of taxation, formed by the Council of Peopleʹs Commissars of the USSR.

The capitalist non‐agricultural population is about 700 thousand people. (180 thousand families, with an average family size of this category of 4 people, according to the city census of 1923). Their average income, as is known from the preceding sections, is about 1,400 rubles. per capita per year, but only about a billion, including the cost of family life, taxes, and net annual savings. The entire taxation of these capitalists, according to Narkomfin, amounted to 180 million rubles. for 1925/26 (perhaps the calculation is somewhat exaggerated). The total non‐agricultural population of the USSR in 1925/26 amounts to 34.75 million people, or 25.3% of the total population of the country.

As for the agricultural population (108.25 million people, or 74.7% of the inhabitants of the USSR, including a small part living in urban‐type settlements), the report of the Narkomfin does not give a breakdown into groups at all. I divide it into four parts: the farm laborers; the poor, managing without working livestock; middle peasant; capitalist layer. The number of each of these layers can be easily determined from the data given in the third section of this book. Only 5 million people belong to the labor force population. All state farmers, foresters, etc., are also placed in the farm labourersʹ part of the agricultural population.

The small number of ʺfarm laborersʺ in comparison with the number of all hired workers in agriculture (and forestry) is explained by the special composition of the farm labourersʹ family. Almost everyone often serves here: teenagers as shepherds, girls as nannies, women are cowherds, etc. Therefore, for one hired worker in farm labor families, there is an insignificant number of completely unemployed dependents ‐ from half a person to two‐thirds of the average

person, mostly small children. As indicated in the third section, according to the incomplete accounting of the CSO, in agriculture and forestry in 1925/26 there were 2,200 thousand employees, but according to the estimate of a special commission, 3,000 thousand people. and for Vserabozemles ‐ 3,600 thousand people. Even if we take the average estimate of the special commission, then, with their dependents, we get at least 5 million people. farm labor population.

The average per capita income here, like that of the poor, is about 75 rubles. (perhaps a little more; here it is necessary to take into account for many employment not for a full year and the presence of a large number of teenagers among the workers). For comparison, it can be said that according to the development of the CSO, about 10 thousand (recognized by him as typical) peasant budgets collected in 1926, in the entire lower group (sowing up to 2 desyatina) of one cash income account for an average of 76 rubles in the USSR. 23 kop. per capita per year (p. 13 No. 5 of the Statistical Review, 1927).

This group predominates in money income, but it itself does not fully correspond to the totality of the circle of farm laborers and poor peasants.

As for the poor population, less than a third (30%) of all economic peasants (that is, of all except the labored population) fall to the share of the poor. This almost exactly coincides with the percentage of households without working animals (out of the total population of the village, 31 million people, the poor population is about 26%). The estimates spread several years ago, according to which the poor make up about 40% of the entire rural population, which were cited by the way and in my speeches and books of that time, are no longer correct. Because part of the then poor over the years moved to the middle peasants, and the other part completely stopped farming, became ʺpure farm laborersʺ or completely went to the city.

In the third section, we determined the size of the capitalist stratum of the agricultural population at 2,250,000 people. (about 450 thousand families) with an average annual income of 600 rubles. per capita for 1925/26 (that is, 3,000 rubles per household). Some indirect confirmation of this calculation can serve as the dynamics of the movement of cash income alone in peasant farms, sowing more than 16 desyatina each (according to the already mentioned development of the CSB, about 10,000 peasant budgets; see the article by Comrade Raevich ‐ ʺThe Monetary Balance of the Peasant Economyʺ, p.

14, No. 5 of the ʺStatistical Reviewʺ for 1927). According to this development, the cash income of such an economy averaged:

In 1924/25 598 rub. In 1925/26 1101 rub.

There are three amendments to this. First, the incompleteness of the data. It is unlikely that kulaks provide the Central Statistical Bureau with completely complete and accurate information about their income. They would be crazy if they did this, keeping in mind the end result in the form of the possibility of new tax measures by the Soviet government. The CSB itself constantly makes very significant estimates, for example, on concealing the area under crops when giving evidence about it. And the need for such an estimate is confirmed by all cases of on‐site verification, when such a verification could be fully and accurately carried out. One might think that the concealment by the kulaks of their money income is still much higher in percentage terms than in the case of the sown area. At what prices did you sell, how much did you sell, etc., in general, it is still much easier to conceal the cash receipts in your pocket than the sown land in the field. However, in order not to go into the realm of perfect fortune‐ telling, we can limit ourselves, bearing in mind the data on the concealment of crops, to the assumption that only a quarter of

the money income is concealed. Then the entire monetary income of the kulak economy in 1925/26. will be up to 1,500 rubles.

But for 1926/27 we define the monetary part of the kulak income as 70% of its gross income (see section three). Given the rapid growth in the marketability of this farm in recent years, as shown by the above table of the CSB, it would not be an exaggeration to admit that in 1925/26 this marketability in it was only 50%.

Then it will be possible to approach the total annual income of 3,000 rubles, based on the CSB budget data on the monetary part of this income (with the above‐mentioned correction for the incompleteness of the kulak budget confession).

In any case, no matter how the situation with the interpretation and reliability of the kulak part of the budgets of the Central Statistical Administration (the budgets of the poor and middle peasants are more reliable, since they have nothing special to hide), the fact remains that, according to data on production, the total income of the kulak economy (natural and money together) must be taken on average at 3 thousand rubles.

The middle peasants include the remaining 70 million people, i.e., 64.6% of the entire agricultural population (including farm laborers), or more than two‐thirds (67.8%) of the economic part of this population alone (excluding farm laborers and their dependents). The annual income of the middle peasants per capita, as follows from the data we cited in section three, in 1925/26 was about 120 rubles. per year, or 600 rubles. per household (average composition of a family is 5 souls).

At first glance, this seems to be greatly underestimated compared to the CSO data on the peasant budgets of this group for 1925/26. (with an average family composition of 5 and a fraction of people), cash income alone averaged almost 350

rubles. But the economy of the middle peasant in 1925/26 was still almost 60% subsistence (see the data of the State Planning Commission in section three). It turns out as if the average is 900 rubles. for the economy. And for the upper groups of the middle peasants even more. For groups of sowers from 6 to 8 desyatina CSB shows only one cash income of 428 rubles. and for those who sow from 8 to 16 desyatina even at 578 rubles. for the economy.

By the way, these data show how fantastic and understated were the calculations about the average peasant income, made before the publication of these budgets by some comrades, who estimated the annual income of the middle peasant (in cash and in kind together) at about 400 rubles. per household for 1925/26 (including income from non‐agricultural earnings). Such an underestimation of the national income of the USSR is especially dangerous, firstly, by distorting the picture of taxation. A tendentious idea is being created that the Soviet system imposes a much harsher tax on the countryside than is actually the case. Secondly, it reduces the idea of our possibilities in general, and thus may lead to a planned delay in the rate of economic development of the country in comparison with the actual possibilities.

The excess of these average budgets of the CSB over the income I determined of 600 rubles. on average, will not be so great if we pay attention to the role played in these budgets by factory employment and personal trade. In the budgets of the highest group (those who sow more than 16 dessiatines), both of these occupations together account for only 6.2%, i.e., they are of completely secondary importance (and are probably expressed in some business of an entrepreneurial nature or in the service of some or from family members in the factory as a clerk, technician, etc.). On the other hand, in the middle‐peasant budgets of families sowing from 2 to 6 dessiatines, both these

occupations together give from 31.6% to 36.5% of the total monetary income. This clearly indicates a confusion in the tables of the CSO on the middle peasants of farms of two different types.

The first is the household of the handicraftsman or factory worker, for whom ʺagricultureʺ is simply a branch of family economics with no market value. Their so‐called ʺagricultureʺ (a piece of vegetable garden, etc.) does not even cover for them the food needs of the family, and the same budgets show that they have to spend an even greater part of their budget on buying food than on buying industrial products.

The other type is the family of an agriculturist (and pastoralist), living on agriculture, for which the small and occasional earnings of one of the members of the family in a factory or in a personal trade are of third‐rate importance, not at all sticking out in the budget. In winter, such a family in some localities sometimes earns a little at the factory, not in waste, but in handicrafts (about 6% of the cash income, according to the average budgets of the CSB for sowing from 2 to 8 desyatina). But in terms of the overwhelming amount of time employed and the overwhelming majority of their total income, such a family remains definitely agricultural.

Then the employees of the Central Statistical Service appear and put them into one table to get the “average”, firstly, a typical otkhodnik and a factory worker (who have retained some connection with the countryside, like millions of our proletariat in general) and, secondly, a peasant farmer (whose daughter entered for a while to a summer resident or went to the city as a servant to collect a dowry). Mixing the factory and the farmer in one statistical table then leads to such surprising results that the income (in cash and in kind) of the middle peasant already in 1925/26 exceeded an average of a thousand

rubles per farm (if we take into account the totality of middle peasant farms according to the budgets of the CSB) .

The grouping together of factory workers and farmers by CSO workers is another continuation of the old Narodnik tradition in our statistics. The Narodniks of former times considered the factory worker a kind of ʺspoiled peasantʺ, almost a fiend.

They strove to show that capitalism in old Russia has no chance of development, is generally insignificant and cannot exist. Every person of peasant (according to the passport) origin was declared to be engaged in sacred agricultural labor, if only he lived in the village and planted potatoes for himself personally in his free time.

And the employees of our Central Statistical Administration (and the report of the Narkomfin borrowed this from them) cold‐bloodedly counted into the agricultural population (“living almost exclusively on income from agricultural earnings,” as the Narkomfin memorandum says), such “peasants” as factory textile workers, eleven months employed in a factory a year, but retaining in the countryside a crop of a quarter of a tithe per family, as construction workers and water workers, eight months of spring, summer and autumn working in their specialty, and appearing in the village for the winter, etc., etc. Suffice it to say that, according to dynamic censuses, the CSO has so far classified as landowning population any family that sows at least one tenth of one tithe per family, although the vast majority of income and time spent by such a family does not fall on agriculture.

In general terms, it is not so impossible to unravel the ʺstatistical messʺ of factory workers and otkhodniks, on the one hand, and of farmers, on the other, arranged by the Central Statistical Administration in the ʺmiddle peasantsʹ budgets.ʺ One need only remember that factory workers and otkhodniks usually do

not have a monetary income from agriculture. For among them, the agricultural branch of housekeeping does not even fully provide food for the family. On the other hand, the middle‐ peasant agricultural economy usually has almost no appreciable monetary income from work for hire in the factory and in personal leisure trades. For the middle‐peasant economy includes precisely those two‐thirds of the farming agricultural village that almost never send workers from their families to hire them, and in turn do not hire them from outside (except in some rare, exceptional cases). Otherwise, they usually fall either into the category of poor families (semi‐proletarians, low‐powered, unable to cover at least a minimum of needs from their economy) or into the category of capitalist families (whose power makes it possible to exploit someone elseʹs labor power). Of course, in practice (at the boundaries between adjacent layers, each layer only very gradually passes into another. But in general, in life there are definitely different types of poor peasants, middle peasants and capitalist farms,

ʺdistractedʺ from which (to mix factory and agricultural workers in one mess ) is by no means recommended.

It is possible, therefore, from the cash income of the middle peasantsʹ budget of those who sow from 2 to 6 desyatina (about

350 rubles, according to the CSB) to exclude the part attributable to income from factory work and personal crafts (not handicrafts), in order to obtain an approximate monetary income of the average peasant farmer. It will turn out about 240 rubles. And since the money income of the middle peasant is only about 40% of his total income, it means that the entire income is approximately 600 rubles. Of course, this calculation should be verified on several thousand genuine middle‐ peasant agricultural budgets, singling them out from the entire collection of factory, construction, water, agricultural and other budgets collected by the CSB, united by the passport origin of the respective families from the former “peasant estate” under

tsarism. Letʹs hope, that the CSO in its middle‐peasant‐ budgetary practice will in the future move from class principles to social and class principles. So far, our attempt to reduce the exaggerated calculation of the CSO to the real one has only an illustrative and methodological value. The bottom line is that the income of the middle peasant farm, in accordance with the calculations on production, must be taken at 600 rubles. for 1925/26, and not more than 1,000 rubles, as would have happened according to the CSB. If the ʺmiddle‐peasant budgetsʺ of the CSB were to be accepted without criticism, then no agricultural products would be enough, no matter how generously they were evaluated. It would be necessary to add up to 6 billion rubles of production, for which there are no grounds, since no one has yet noticed such a huge excess of agricultural production over the values \u200b\u200bhitherto taken (including the CSB itself). By itself, one must also discard the caricaturally underestimated tendentious estimates of the total income of a middle‐peasant family of only about 400 rubles. per year, which can serve only for agitation, how badly the middle peasants live under Soviet rule (supposedly worse than under tsarism), but by no means for any true depiction of reality.

It should be noted that when it comes to the income of the agricultural population, I use the concept of ʺincomeʺ in the same sense in which the CSB, Gosplan and Narkomfin use it. This means the price of all agricultural products minus the costs of their production (including wages to farm laborers), but without deducting the costs of family living and taxes.

To this is added, according to the same method, the products of forestry, fishing, and hunting, as well as from handicraft and other crafts, non‐agricultural hiring on the side, etc., since all this for this family is a secondary source

of income, and not the main one (otherwise the family leaves the number of agricultural families).

In total, all this gives for 1925/26 about 12 billion red rubles. To this I add almost another 400 million rubles. wages of the laboring population, as subtracted from the price of production when determining the income of the agricultural population. The natural part of the income is valued at the same time ʺat producer pricesʺ, which, in fact, is not always entirely correct and underestimates the calculation of the budget of the economic peasant population.

It should be estimated at retail prices in the countryside for the same products for the part of the rural population that buys them for the purpose of personal consumption (laborers, the poor, handicraftsmen, etc.). But for such a revision, we do not have the necessary data.

To this amount of income of the agricultural population (12,400 million rubles), all its real taxation (830 million rubles) in 1925/26 amounted to about 6.7% (the Narkomfin report gave an exaggerated figure of 9% due to the lack of her amendments, which are discussed above). This calculation is confirmed, among other things, by direct data collected by the Central Statistical Office on the percentage of the agricultural tax to the monetary part of the peasant income. According to the data of the Central Statistical Bureau, the payment of agricultural tax on average in the USSR in 1925‐26 took up only 4% of the entire monetary budget of all groups of peasants on average (according to the 10,000 budgets mentioned).

According to Gosplanʹs ʺControl Figuresʺ we know that the average monetary part of output for all the peasants of the USSR is about 460/0 (and 540/0 in kind). Therefore, in relation to all income, the agricultural tax is only about 1.84%. And according to the report of the Peopleʹs Commissariat of Finance, the agricultural tax is about 30% of the total amount of taxation falling on the peasants. So all of it should be 6.1%; to their income, based on the data of the CSO, that is, even a little less than what I get by direct calculation.

As we have seen, for the non‐agricultural population, the average amount of income deducted from income by taxation is 13.6 % (about 1,500 million rubles out of about 1 billion rubles of income), or twice the percentage.

It is possible to give the following comparative indicative tablet on the results in this respect in 1925/26:

Agricultural non‐agricultural population Of the population of the USSR .... 74.7% 25.03%

the total income of the population 52.0, 48.0 the amount of taxation . . . 35.8 64.2

We shall touch upon the elucidation of this table when we give it a division into classes—without this it is too general. Let us only note that here, as elsewhere, we take into account only the income of the population, without the income of the state economy (which, according to the Iarkomfin and Gosplan, accounts for about 7% of the total national income). For we attribute all taxation, naturally, as indicated above, to the income of the population.

As regards the distribution of the severity of the taxation of the agricultural population among its individual groups, to establish this, one can use, firstly, the data of the Narkomfin reports on the composition of all this taxation, and secondly, the information of the Central Statistical Service (on peasant budgets), what percentage of the monetary part of the budget is the payment of agricultural tax.

The entire taxation is divided into two parts: built progressively (as an agricultural tax) and paid in proportion to consumption (as a shiftable part of excise taxes or! and trade tax).

The size and composition of each part are detailed in the report of the Narkomfin. The percentage severity of the agricultural tax separately for each group is given by the CSB. To distribute the part of taxes paid in proportion to consumption, it must be borne in mind that the consumption of the middle peasants almost exactly corresponds to the average peasant consumption (which was derived in the report of the Narkomfin according to the data and calculations of the Central Statistical Board and the State Planning Commission).

The per capita consumption of the capitalist group must be calculated in the countryside as an average: not less than three‐ quarters or twice as high as the per capita consumption of the poor farm laborers.

Under such assumptions, we obtain the severity of taxation, i.e., the percentage of withdrawals by tax payments from income: for the poor peasants and laborers group ‐ 4.25%, for the middle peasants ‐ 7%, for the kulak capitalist group ‐ 9.3%, and on average for of all agriculture—6.7%.

Let us now compare the percentage distribution by classes of the population, the amount of income and the amount of

taxation separately for agriculture and for non‐agricultural occupations. We get such results. For the total agricultural population we have:

Groups popul‐‐From income‐ From the tax amount

		(in percent)
Poor‐Labor	33.3	21.7	14
Middle	64.6.8	67.5	71
Capitalist	2.1	10.8	15

For the non‐agricultural population, the result is:

Groups popul‐‐From the income‐ From the tax amount

(in percent)

Worker	69.2	59.5	65.3
Petty‐bourgeois	28.8	3І.5	22.7
Capitalist	2.0	9	12

The anti‐capitalist character of our taxation shows itself quite clearly in these tables. The capitalist group in both cases pays a part, not only a large share; in the population, but also a larger share of its income.

At the same time, the tables show that in itself the average severity of real taxation for both capitalist groups is rather moderate in our country (if we do not inflate the accounting of reality by deliberately shifting fees to others, such as rent for premises, etc., and do not focus on large tax rates for almost non‐existent capitalists with hundreds of thousands of income, while for our urban capitalist a typical income is from 5 to 10 thousand rubles a year, and even less in the countryside).

However, the probability of some under‐taxation of the capitalist group and the desirability of strengthening it were

already recognized by the decision of the Council of Peopleʹs Commissars on the ʺControl Figuresʺ of the State Planning Commission, published in the autumn of 1926. In the next chapter, we indicate what amendments have already been made in this regard to the practice of 1926 /27 of the tax year and what they managed to achieve.

If we compare the severity of the tax and tax‐like burden (i.e., the percentage of withholding from income) for similar groups of agriculture and non‐agricultural occupations, then by the nature of the materials it will be necessary to compare the entire group of poor peasants and laborers with a worker (“lower group”), the middle peasants—with the petty‐ bourgeois (“middle”), and both capitalist. The result is as follows:

Groups rural economy non‐agricultural activities (in percent)

Lower 4.25 4.3

Medium 7.0 9.7

Capitalist 9.3 18

For all groups, the percentage of real taxation in non‐ agricultural occupations is higher than in agriculture. In general, for agriculture it turns out to be 6.7%, and for the rest of the occupations ‐ 13.5% (before the report of the Narkomfin, both percentages were calculated slightly higher due to the above errors ‐ for agriculture 9% and for other occupations 15,4%).

In both cases, the capitalist group is relatively heavily besieged. What is striking is the presence of a certain “re‐taxation” of the worker‐employee group in the city. This is explained by the fact that the proletariat, as the bearer of the socialist reorganization of society, consciously takes upon itself a relatively greater part

of the burden than it somehow imposes on its allies from the field of private labor economy (the middle peasant in agriculture, the handicraftsman in industry, etc. ʺsimple commodity productionʺ ). This line of the proletariat finds expression, firstly, in the taxation of a significant part of the workers and employees with income tax, and secondly, mainly in the system of indirect taxes adopted by us on consumer goods of factory origin.

The latter explains to a large extent the difference in the severity of taxation between agriculture and other occupations. Farmers, instead of products subject to indirect and customs taxes, partly consume home‐made products, and partly consume less of these products per capita in comparison with the rest of the population.

If we take as 100 the entire population of the country, all of his personal income and the entire amount of taxation, then for 1925/26 we get the following table (in percent):

Groups Population Income Taxation

Bednyatsko‐farm	25.1	11.5	5.0
Middle‐peasant	49.0	35.7	25.9
Kulak‐peasant	1.6	5‐6	5.4
Worker ‐ employee non‐agricultural	16,8	28.0	42.1
Petty‐bourgeois non‐agricultural..	7	14.9	13.9
Capitalist non‐agricultural	0.5	4.3	7.7

In the first group, the “laborers” part accounts for 3.4% of the total population of the USSR, and the poor—21.7%. Altogether, wage earners account for 20.2% of the population of the USSR, or about 29 million people. The agricultural farming peasantry

(without the farm laborers, that is, without hired workers with their families) accounts for 72.3% of the population of the USSR (before the war, the entire agricultural population of Russia accounted for 74%).

Both capitalist groups together (agricultural and non‐ agricultural) account for 2.1% of the total population, about 10% of the total personal income of the population (including net accumulation, of course), and of the total taxation, 13.1% (the share as we have seen, they are approximately the same in the countryʹs net accumulation—about 13.9 percent.

At the same time, the under‐taxation of the capitalist group in agriculture in comparison with the capitalist group outside agriculture is clear. It is enough to compare the percentage of income and taxation for both groups to be convinced of this.

If this ratio were fully equalized, in 1925/26 it would be possible to obtain about 30 million rubles a year more from the kulak‐ capitalist group of peasants. As we shall see, this possibility is taken into account by the agricultural tax for 1926/27. .7% of the total tax. For in it almost the same share of the income of the entire population falls on a much smaller number of persons.

Comparison of the amount of tax payments paid by the capitalist strata with the net annual savings remaining after that (and after covering all the expenses for their household and for the maintenance of their families) gives the following result.

The capitalists of agriculture pay 125 million rubles in taxes. and they accumulate 125 million rubles, which means they pay for public needs half of what remains after covering household and family expenses. The capitalists of trade, industry and the monetary market pay 180 million in taxes. rub. and accumulate 250 million rubles, which means that they pay for public needs only about two‐fifths of what remains after covering the

expenses for the household and for the maintenance of the family.

Thus, although the capitalists of the ʺcityʺ pay a larger share of their income in relation to the total of their income than the capitalists of the ʺvillageʺ, they give a smaller part of the remainder (free after covering the expenses for family and farming) for public needs. So the well‐known simple ‐r for increasing seizures remains here (see!, next chapter).

By bringing together all the proletarian and semi‐proletarian strata (farmers, agricultural poor, workers, white‐collar workers, registered unemployed, day laborers, otkhodniks of the proletarian type, servants), uniting together all small private farming of the labor type (agricultural middle peasants, industrial handicraftsmen, liberal professions, small house owners, pensioners, peddlers, etc.) and putting the two capitalist groups together, we obtain for the USSR as a whole for 1925/26 the following totals (in percentages):

Groups Population Income Taxation proletariat and semi‐proletariat.

41.9 39.5 47.1

Private labor economy. . .

	56	50.6	39.8
Capitalists.	2.1	9.9	1З,1

This table shows that the exploitative income of the capitalists in the USSR, in general, is obtained mainly through the exploitation of the private, labor economy, and not of the proletariat1. This is not surprising, if we recall the main directions of the procurement, trade, credit, and industrial‐ organizational (ʺdomestic systemʺ) activities of the capitalists, illustrated in our previous statement.

The proletarian revolution dealt a decisive blow to the exploitation of the workers by the capitalists (so far, in the main, only a few branches of the commercial supply of foodstuffs to the workers, 2 a small comparatively capitalist industry, the exploitation of rural farm laborers, have remained).

The question of overcoming the sprouts of capitalism within the USSR is now primarily a question of abolishing the dependence of private labor economy on the capitalists and replacing it with a link: with the state economy in order to draw private labor economy into the general channel of socialist development.

1 If we compare the taxation not with income, but with net annual accumulation (remaining after paying taxes and covering expenses for the family and household), then it would turn out that such a labor economy is taxed more than the capitalist stratum. Of the total annual net accumulation of the country (2,700 million rubles) and of the entire mass of taxation (2,330 million rubles), the share is:

From taxation From the accumulation of private labor economy. 39.8% 19.5% capitalist groups. . 13.1ʺ 13.9ʺ

The rest of the taxation falls on the worker‐employee group, while the rest of the accumulation falls mainly on the proletarian state (with cooperation) and in a certain secondary proportion on the worker‐ employee group, dispersed among families.

2 Incidentally, private trade is now exploiting another 150,000 wage workers in private trade itself, which, together with family members, adds up to 400,000 people.

As the table above shows, the per capita income of the capitalist strata is, on average, about five times higher than the per capita income of the proletarian and privately laboring population (moreover, this ratio turns out to be quite consistent both

among the agricultural and non‐agricultural population separately).

To a certain (albeit relatively modest) degree, this inequality is mitigated by the totality of our tax measures. So, for one percent of his income (out of the total income of the population), each class pays the following percentage of taxation (out of the total amount of tax payments):

Private labor economy............................. 0.8%

Proletariat and semi‐proletariat.............. 1.17%

Capitalists................................................ 1.3ʺ

Attentiveness to allies (lowering for them the relative burden of taxation by almost a third against their own burden) and pressure on the capitalists (increasing the relative burden for them by one ninth) are the main features of tax policy, as they are characterized by a study of the experience and real results of 1925/26. In the following year, 1926/27, the pressure on the capitalists was somewhat intensified.

The government directives published to this effect allow us to expect a further development of this process as we study the state of private capital, the circumstances and extent of its accumulation and the weaknesses of our tax legislation, insofar as they can already be clarified by experience. It is to the latter that we now turn.

Taxation and opposition.

After the opposition was excluded from participation in the leadership of the central economic bodies (STO, Narkomfin, Gosplan, Narkomtorg, etc.), the party began to study more closely the practical line pursued in these bodies and its actual class results. A number of points revealed that glaring contradiction between ʺanti‐bourgeoisʺ phrases and between

the practical line concessive to private capital, which was generally characteristic of the opposition (cf. the explanation of this contradiction in my work, The Social Meaning of the Party Opposition, in Pravda. for October 1926). This contradiction turned out to be especially evident in tax practice.

Of course, the main principal lines of tax policy were decided by the Party. Therefore, in politics itself one cannot find perversions of our program and common line. But the practical subtleties of all sorts of extensive, multi‐section tax

ʺregulationsʺ, ʺrulesʺ, ʺdecisionsʺ—all this was already worked out and carried out by the apparatuses under the direct leadership of the opposition. Suffice it to recall that the most responsible representatives of the opposition at the same time included the Peopleʹs Commissar of Finance; member of the Board of Narkomfin in charge of the Budget Department; Deputy Chairman of the State Planning Committee in charge of the economic and control plan; Chairman of the Budgetary and Financial Section of the State Planning Commission; coordinating the issues of private taxation, the peopleʹs commissar of trade, and earlier the chairman of the STO, etc. In a word, all the detailed study and preliminary coordination of tax bills was carried out by apparatuses headed precisely by the opposition. It goes without saying that the basic directives of the Party always remained in force—we have always taxed the capitalist on a larger sum than the worker, and the kulak was taxed on a larger sum than the poor, etc. But within the framework of these directives, it turned out that detailed practical measures, which in their totality meant a relative favor for large private capital, which weakened the useful effect of the adopted political directives. The passage in the Soviet order of these multi‐paragraph tax laws through the Council of Peopleʹs Commissars and the Central Executive Committee did not help the matter enough, because attention was focused there on the main lines, and not on an infinite number of tax

rates in the appendices (components, for example, an entire pamphlet on agricultural tax). And the speed of passing through the meetings of the CEC and the Council of Peopleʹs Commissars generally excluded the possibility of a detailed check of all individual rates. And the practical trend of these rates, as it later turned out by experience, could not be assumed without becoming acquainted with them in detail. It so happened that the tax practice developed and led by the opposition in a number of points diverged from the directives of the party in the direction of favoring private capital. The respective leaders of the opposition are primarily responsible for these practical perversions and for the direction that the bureaucratic apparatus, which was under their close leadership and control, was able to pursue in this regard. The Party then had to and still has to gradually study and correct these opposition‐bureaucratic perversions.

First, we have a completely definite line that the agricultural tax should be harder for the kulaks than for the middle peasants, and even easier for the weak. Meanwhile, the already mentioned memorandum of the renewed Narkomfin (developed under the leadership of V. Rzhevussky) established that, in fact, the rates were developed in a way that led in practice to the opposite result. As a result of checking what turned out to be in fact in 1925/26, the Peopleʹs Commissariat of Finance on page 92 of the report gives a table showing throughout the RSFSR as a whole the severity of the agricultural tax on each group of peasants. The burden of taxation refers to the percentage of agricultural tax withdrawal of funds from the income of the peasant economy. All farms are divided into groups according to the average income in rubles per capita of each family member (in order to receive family income, this value should be multiplied by five. The result of the check turned out to be the following for the RSFSR:

Groups by income per capita Withdrawal percentage

From 60 rub. up to 80 rubles	4.9
From 80 rub. up to 100 rubles	4.9
From 100 rub. up to 150 rubles	4.1
From 150 rub. up to 200 rubles	3.7
Over 200 rubles.	2.8

In other words, the more prosperous the peasant, the easier it was to calculate tax rates for him. While the party gave the directive to press the kulak and lighten the middle peasant, the apparatus, headed and led by the leaders of the opposition, for which they bear full responsibility, pursued a sharply sustained line of relatively favoring the more powerful economies in the development of rates. For the poorest group, according to the same report, the size of the withdrawal in the RSFSR turned out to be up to 10.1% of income, i.e. three and a half times more difficult than for the most prosperous.

In the publication of the Peopleʹs Commissariat of Finance of the USSR, published in 1927, ʺAgriculture according to the agricultural tax for 1925/26ʺ p. 21 of the ʺIntroductionʺ (in Comrade Lifshitzʹs article) provides a clear illustration of the methods used to achieve this result. The government gave a directive to reduce the agricultural tax in 1925/26 by 30% against its total value in 1924/25. The Peopleʹs Commissariat of Finance complied with this directive, but distributed the reduction in separate categories in such a way that the kulaks received a discount more than the middle peasants and the poor peasants, and for the poor peasants the rates taxes were partly even increased. Thanks to this, in contrast to the entire Soviet tradition, during the period when the opposition was in charge of the tax business, that unsightly picture was obtained, as evidenced by the above official table.

Comrade Lifshitz gives such a clear example. For the purpose of imposing the agricultural tax, the peasants are divided into nine groups (the least sowing and least arable is the first, the most arable and the most sowing is the ninth). Within each group, tax is levied at three rates:

1) for the first half a tithe per consumer,

2) for a portion above half a tithe to one and a half tithes per eater,

3) for a portion above one and a half acres per consumer.

It turns out that in establishing these detailed rates for 1925/26, compared to 1924/25, a combination was made, which can be illustrated by the following table of results for the Tula province (from p. 21 of Comrade Lifshitzʹs ʺIntroductionʺ mentioned above). A minus means a decrease in the rate as a percentage against the previous year, and a plus means an increase.

Groups First rate (in %) Second rate (in %) Third rate (in %)

First (lowest)	‐40	‐14	+15
Ninth (highest)	‐53	‐35	‐15

It was necessary to use the entire reduction in agricultural tax (about 100 million rubles) to alleviate the situation of the poor and middle peasants, in order to give them the opportunity of as much as 100 million rubles. invest in improving your business. For this, the state made such a sacrifice as reducing the agricultural tax by 100 million rubles, despite the general strain on the state budget and its insufficiency to fully satisfy all needs. And the apparatus of Narkomfin, led by the opposition, used this to reduce the taxation of the kulaks as much as possible, not only due to a general reduction in agricultural tax, but even due to an incidental partial increase in tax rates for the lowest group. The theoretical substantiation

of such a line of ʺassistance to the development of the productive forcesʺ can be found in some of Comrade Sokolnikovʹs speeches, for example, in his speech at the December Party Congress of 1925, not speaking, however, directly about the agricultural tax and about the application of this theory to the tax business in general. And what it means in practice, we are now examining this gradually, only as we really study the tax practice that was inherited from the comrades who carried it out with distortions and deviations from the fundamental directives of the Party.

It goes without saying that during the implementation of the agricultural tax in the next 1926/27, these distortions were corrected. The severity for the poor was lowered, the severity for the upper groups was increased. The following year, 1927/28, this correction of perversions was further aggravated. But even the reporting data on the completed collection of the agricultural tax for 1926/27 clearly indicate that a sharp change in practice has come about the return of the renewed financial agencies from oppositional perversions to Soviet traditions, to actual observance of fundamental party directives. I will cite as an example (from p. 93 of the mentioned memorandum) data for three districts: Valdai district, Starorussky district, Omsk district. These data show the percentage of agricultural tax withdrawals from the incomes of peasant families, divided into groups according to profitability per consumer (p. 273).

Comparison of this tablet with the previous one can serve as an excellent illustration of the question of the real social meaning of the exclusion of the opposition from participating in the leadership of the main government bodies. Marx taught that the highest criterion of theory (the yardstick for its evaluation) is practice. Lenin added that the idiot is the one who believes in the word. The practice of agricultural tax, as well as further

points of this chapter can help guide those who wish to understand the words and deeds of the opposition.

Groups %)	1925/26	1926/27	Plus or minus (in
Omsk district: a) the lowest group			4.1	2.4	‐40
Omsk District: b) the highest group			13.5	16.2	+20
Starorussky district: a) the lowest group			2.8	2.0	‐29
Starorussky district: b) the highest group			5.6	15	+167
Valdai district: a) the lowest group			2.1	1.9	‐10
Valdai district: b) the highest group			6.8	14.3	+110

The second essential directive of which we now have to speak—and which has never been rescinded by the Party—is that taxation should be more favorable for co‐operatives than for private enterprises. Meanwhile, the verification of the

ʺinheritanceʺ showed that, in fact, the comrades from the Narkomfin were bending the line to reduce the burden of taxation for private traders and to increase the burden of taxation for co‐operatives. This, of course, fully corresponds to the principled line of a number of prominent leaders of the opposition, who recommended that state capital be withdrawn from trade and thereby, therefore, that co‐operative trade be replaced by private trade (in the name of accumulating additional funds for the construction of new factories at the moment). But this, no doubt, should come as a surprise to party public opinion, which has a completely different attitude. The report of Comrade Grossman, inspector of the NK RKI of the USSR, agreed with the Narkomfin (February 1927), compares the change in the severity of the trade tax (equalization fee with offset of the patent fee) for cooperation and for private traders in the period of interest to us. The severity of the taxation is

expressed here as a percentage, which is the taxation in relation to the turnover of the co‐operatives separately and private traders separately.

Months Cooperation private traders April‐September1924 0.6 1.3

October1925–March 1926 0.8 1.2

Thus, the severity of taxation for cooperatives increased by 33%—by a third, while the severity of taxation for private traders, on the contrary, decreased by 8%. Private traders were taxed in April‐September 1924 heavier than cooperation by 116%, and in October 1925‐March 1926 only by 50%. Thus, the poor private traders, whose net savings are already determined by the Peopleʹs Commissariat of Trade for 1924/25 at 30% for capital, were given the opportunity to put into their pockets an additional difference from the reduction in taxes for them (up to 20 million rubles). And it was difficult for the cooperatives to oust the private owner and reduce the cost of goods. For the “oppositional” Narkomfin covered the shortfall from the reduction in the burden of taxation for the private trader by increasing the burden of taxation for the cooperatives. This is not quite like the financing by the proletariat of the cooperative system it needs, bequeathed by Lenin. This is more like financing the capitalist economy through cooperation22 .

22) A situation has arisen, writes Comrade Grossman, that “in almost all branches of trade (with the exception of trade in furs, oil products, manufactory, pharmaceutical and perfumery goods, and factory equipment) the percentages of taxation of private trade are the same as the percentages of taxation for state and cooperative trade (p. 10 of the report to the said commission). Therefore, the need to review the situation for each branch separately is clear.

In order to correct this distortion, after a proper assessment of the ʺlegacyʺ left by the opposition, the Soviet government, already in 1926/27, put into effect an increase in the trade tax for the capitalists, in conjunction with a special tax on commercial excess profits. For 30 gubernias there are already reports from the Narkomfin on the results of taxing private traders in 1926/27 under the new law on trade tax (reported by Comrade Frumkin). It turns out that taxation has increased by an average of 46% against the previous year; but since the turnover of private traders increased by 38%, the actual severity of their taxation under the new law increased by almost 6% already liquidated.

First, it turns out that in our country large merchants are taxed relatively lighter than small ones. Secondly, a detailed analysis (analysis and evaluation) of tax rates, as they were developed at one time by the Narkomfin apparatus and still exist today, shows that their nature, as Comrade Grossman puts it in his report, “does not correspond to the main direction of our policy in with respect to private capital: its transfer from trade to industry” (p. 10 of the mentioned report). In most branches of trade, the rates of taxation of capitalists are equal to the taxation of state and cooperative trade. And in almost all branches of private industry they are, on the contrary, higher than in state and cooperative industry. This creates easier conditions for private capital to compete in trade than in industry. It is, as it were, deliberately diverted from the organization of the production of new useful objects to the organization of speculation with already existing objects. In the section on industry, it has already been pointed out that, for tax reasons, it is more advantageous for the capitalists (where technology permits) to organize a ʺdomestic systemʺ of capitalist exploitation instead of directly opening workshops and factories. The question of changing taxation towards less stringent conditions for private industry (except for its

undesirable branches) than for private trade is currently on the agenda. Thus, this perversion of tax practice will also be eliminated. where technology permits) to organize a ʺdomestic systemʺ of capitalist exploitation instead of the direct opening of workshops and factories. The question of changing taxation towards less stringent conditions for private industry (except for its undesirable branches) than for private trade is currently on the agenda. Thus, this perversion of tax practice will also be eliminated. where technology permits) to organize a ʺdomestic systemʺ of capitalist exploitation instead of the direct opening of workshops and factories. The question of changing taxation towards less stringent conditions for private industry (except for its undesirable branches) than for private trade is currently on the agenda. Thus, this perversion of tax practice will also be eliminated.

As for the taxation of large traders lighter than small ones, here we have a semblance of the same inverse progression that we saw above for the agricultural tax in the RSFSR in 1925/26. The Peopleʹs Commissariat of Trade of the USSR in table No. 13 of its report of December 1926 (see also the publication Narkomtorga ʺPrivate trade in the USSRʺ, M., 1927) provides relevant detailed information on the taxation of private trade for 1925. Private trade for taxation purposes was divided into five categories (lower, peddlers ‐ first; highest, largest ‐ fifth ). For cities, the Peopleʹs Commissariat of Trade has developed and given information starting from the second category (the second is mainly kiosks, the third is ordinary retail shops, etc.). All figures in Table 13 show the percentage of taxes in relation to the sales turnover of private commercial enterprises of each category. Here, first of all, data on

2nd category 0.85, 3rd category 0.42, 4th category 0.30,

5th category 0.19.

The picture is perfectly clear. The larger the private trader, the larger the amount the private trader sells, the smaller the share of the turnover in the form of a patent fee was taken from him by Narkomfin at the rates worked out under Comrade Sokolnikov. I have already pointed out and I emphasize again that it is absolutely impossible to hide behind the formal approval by the authorities of the corresponding ʺregulationsʺ,

ʺinstructionsʺ, etc. of tax regulations. The Party and the Soviet government have never given directives to tax large merchants more easily than small ones. Vice versa. When draft laws were submitted for approval to the relevant authorities with tables of different rates, etc., it could not occur to anyone that if all these rates were suspected and deciphered, then there would be more relief for the kulak compared to the middle peasant. and for a large merchant a relatively lighter taxation compared with a simple kiosk or with a street peddler from the unemployed. The text itself did not hint at anything of the kind, and Comrade Sokolnikov never warned in his numerous reports that such a picture would turn out in practice.

This applies not only to the patent fee, but also to the totality of all taxes. The Peopleʹs Commissariat of Trade in the indicated table No. 13 also provides a certificate on what percentage of the sales turnover for private trade was the total of all taxes (including income, trade, stamp, etc., including all local):

2nd category	5.02
3rd	5.05
4th	4.00
5th	2.47

Sometimes rumors are spread that payments for rent of premises and similar tax‐like collections are allegedly especially capable of hurting precisely the big capitalists.

Therefore, the Peopleʹs Commissariat of Trade also provides information on the amount of taxes, along with rent and other

ʺtax‐likeʺ payments. Result (percentage):

2nd category	7.81
3rd	7.00
4th	5.07
5th	2.87

The result is exactly the same for private trade in the countryside. For the village, Narkomtorg gives (in the same table No. 13) data on all five categories. I will give only a general result, including all taxes (patent, equalization, income, stamp, etc.), all fees, rent and other tax‐like payments (as a percentage):

1st category	10.81
2nd	8.45
3rd	6.07
4th	4.31
5th	3.55

Consequently, a large private merchant in the countryside, in relation to the amount of his sales, is taxed (including rent, etc.) three times lighter than a street peddler. We have almost the same difference in the city between a large merchant and a kiosk. Meanwhile, the net accumulation of the big (the capitalist) is large, while the street and kiosk stores have almost none or none at all. It may occur to anyone that since wholesalers are placed in the fifth (highest) category, they should be taxed lighter, otherwise they will shift the increase to retailers. But why, then, should a larger retailer of the third

category be taxed lighter than a smaller retailer of the second category, and even more so of the first? There is no rational basis for this, but it is simply necessary to establish a distortion of tax practice in the direction of directing the main pressure not on the capitalist (as follows from the directives of the Party and the Soviet government), but in the direction of the private owner of the non‐exploiting type, petty and minute. This is especially pronounced in the field of so‐called ʺtax‐likeʺ payments (rent for premises, utilities). If, according to the data on the taxation of private trade in cities, we take the relative value of payments for the second tax category of private traders (kiosks) as 100%, then for much larger traders of the fourth and fifth categories, according to the same table of the Peopleʹs Commissariat of Trade, we get: utilities). If, according to the data on the taxation of private trade in cities, we take the relative value of payments for the second tax category of private traders (kiosks) as 100%, then for much larger traders of the fourth and fifth categories, according to the same table of the Peopleʹs Commissariat of Trade, we get: utilities). If, according to the data on the taxation of private trade in cities, we take the relative value of payments for the second tax category of private traders (kiosks) as 100%, then for much larger traders of the fourth and fifth categories, according to the same table of the Peopleʹs Commissariat of Trade, we get:

	Taxes (in %)	Rent, etc. (in %%)
2nd category	100	100
4th	80	24
5th	49	15

Extreme unevenness, irregularity, and even reverse progressiveness take place, in particular, precisely in the payment of rent, utilities, etc. Therefore, at the present time, when we have sorted out the ʺopposition legacyʺ, the question

of revising all these ʺtax‐like ʺpayments (like rent and utilities), firstly, towards lowering them for merchants of the first and second categories (for peddlers and kiosks) and for handicraftsmen who do not have hired workers, and, secondly, towards bringing them into line with the principles of taxation ( which means an increase for large traders compared to small ones).

The fifth perversion of the party line by tax practice in the same year of the leadership of the oppositionists in the financial apparatus consists in a peculiar, quite definite shift in the tax burden within the non‐agricultural population. We have seen above what happened during this period with the agricultural tax and how the party later had to correct the distortions committed in this respect. We also saw the manifestation of certain corresponding tendencies in the taxation of private trade. Now the Peopleʹs Commissariat of Finance of the USSR (see his same report) has compiled data on changes in the taxation of income tax in 1925/26 on various parts of the non‐ agricultural population in comparison with the previous 1924/25 (pp. 44‐45 of the report). As is well known, no income tax is levied on peasants; agricultural tax is taken from them. Percentage of income tax withdrawal of funds from the income of each group of the population, set by the Narkomfin for 1924/25, we take it as 100% and then, using the same Narkomfin plate, we look at how many percent it increased (plus) or decreased (minus) in 1925/26 against the previous year. The result (as a percentage) is:

1.Working	+28
2. Employees	+45
3.Personal trades (labor)	+1
4. Homeowners (small)	+9

5. Merchants and entrepreneurs:

a) small ‐6.0

b) average ‐2.5

c) large ‐3.8

6. Pensioners, fellows, etc. no change

This table fully explains why for the next year, 1926/27, a new income tax law was issued. For the latest creativity of the apparatus headed by the opposition, which existed in 1925/26, meant, as we see, a noticeable increase in the burden of taxing workers and employees with income tax, a certain increase in the burden for small private economy (labor trades) ‐ and along with this a decrease in the burden for all merchants and capitalists (including industrial ones). Party and Soviet directives in this manner to calculate and set tax rates were put on the head. They had to be put on their feet. To this end, in the new income tax, adopted ʺafter the oppositionʺ (which came into force on October 1, 1926), workers and employees receiving up to 100 rubles are exempted from income tax. per month (previously it was up to 75 r. —and despite the unanimous desire of the CEC commission to raise the non‐ taxable minimum to 100 rubles. already in 1925/26, Comrade Sokolnikov then insisted on not approving this decision), and the income tax rates for the capitalists were raised. Certificate No. 19 to members of the Budgetary Commission of the All‐ Russian Central Executive Committee (dated July 3, 1927) summarizes the changes in connection with this distribution of income tax in the RSFSR in 1926/27 compared with the previous year. At the same time, the tax from all individuals and private legal entities is taken as 100% (that is, the tax from state and cooperative enterprises is not counted). The result is as follows:

) gives a summary of the changes in connection with this distribution of income tax in the RSFSR in 1926/27 compared

with the previous year. At the same time, the tax from all individuals and private legal entities is taken as 100% (that is, the tax from state and cooperative enterprises is not counted). The result is as follows: ) gives a summary of the changes in connection with this distribution of income tax in the RSFSR in 1926/27 compared with the previous year. At the same time, the tax from all individuals and private legal entities is taken as 100% (that is, the tax from state and cooperative enterprises is not counted). The result is as follows:

	1925/26	1926/27
Workers and employees	15.4%	8.5%
Non‐labor elements	65.7%	79.0%

The rest of the income tax from individuals fell on small private labor farms.

Of course, as has already been mentioned in relation to the entire taxation as a whole, even in 1925/26, despite all these distortions, the capitalists were taxed more heavily in our country than the workers. A different setting would immediately catch the eye in the text of any law, and no one would tolerate it or miss it. But the tendency towards opposite corrections in practice, through the corresponding

ʺdevelopmentʺ of detailed rates, is shown and proved by the above series of facts in full.

And, of course, it gave in practice its harmful results, which are characterized quite higher according to official data. Only after the oppositionists were removed from the leadership of the tax business was this “legacy” sufficiently clarified, and a review and correction of the observed distortions began, which continues to this day.

The fact that all these perversions are directed only in one direction may not be characteristic of the practice of those

figures who, like Comrade Kamenev (then chairman of the STO), Comrade Sokolnikov (then Narkomfin), Comrade Smilga (then the de facto head of the State Planning Commission , first deputy chairman of the ailing), led the development and implementation of all this practice, and now they are not averse to declaring themselves especially “left” and almost former “forever left.”

The sixth point in this practice, to which special attention will need to be paid, is the almost complete lack of development of measures for taxing private credit capital. We have seen above its dimensions and significance for bourgeois accumulation. Public opinion quite rightly recognizes the monetary and credit operations of the capitalists as the most profitable branch of their activity.

And it is precisely these operations that remain in our allotment almost completely without taxation, while capitalist and labor private industry and trade are taxed. The main difficulty here is the absence of such brightly conspicuous external signs as are to some extent in trade and partly in industry. But this difficulty is not insurmountable.

We saw above (Section Six) that two‐thirds of private credit capital is invested in capitalist medium and large‐scale industry and trade. The number of all such enterprises is not immensely large, only about 180 thousand, and their business books (which they are obliged and should be obliged to keep) are controlled by financial inspectors.

The data of these books and the balance sheets drawn from them contain, as we saw from the Narkomfin questionnaire, information on very large amounts of private credit capital, hundreds of millions.

It is possible to establish, for example, the imposition of a certain percentage of all credit turnover of a given commercial

or industrial enterprise (with the adoption of measures to attribute this taxation due to a corresponding decrease in interest on these credit transactions, etc.).

You can outline some other clues for solving the same problem; this is not the place to enter into technique, but the task itself must be set practically, in contrast to the almost complete tax laissez‐faire in the revenues of the capitalist monetary market, which has existed until now. The lack of energy in this regard, although unconscious, can be put in some kind of internal connection with the initial calculations on the role of capitalists for the formation of an internal stock market, where government loans could be placed.

We have already described the change in orientation that took place in the Narkomfin in this respect after Comrade Sokolnikov, and its correctness has been shown.

In connection with the question of the taxation of private capital, two more circumstances must be noted. First, about a year and a half ago, the calculations of some workers of that time about an unheard‐ofly huge taxation of private capital were circulated among us. It turned out that not only could there be no significant accumulation, but in general one was left to wonder how these sufferers still exist. It turned out that taxes and tax‐like payments should absorb from private entrepreneurs 70 and 80 and even 91% of their entire income (minus the costs of the operations themselves, but without taxes). It remained a mystery why these selfless people are still engaged in trade, if it is unlikely that for the rest it is possible to provide the family with at least the standard of living of a low‐ skilled worker?

The tendentiousness and agitational striving of these calculations were clear even then. Their task was to create the impression of such an allegedly existing, extreme over taxation

of private capital, in order to prepare the ground for that policy of more favoring it, which was simultaneously carried out by the same apparatus by modestly developing and conducting various complex, long, and confused tables of rates and salaries that were attached to the corresponding ordinances and rules. Let us not forget that all these calculations were made, published, and advertised at the very time, about which now both the Peopleʹs Commissariat of Trade, and the State Planning Commission, etc., on the basis of all the surveys carried out later and the materials collected, established that one net savings from private traders then amounted to at least 30% per year for capital.

Now the secret of these statistical tricks is fully revealed. ʺThe casket just opened.ʺ It turns out that tendentious propagandists in favor of private capital—some probably consciously, and some, presumably, out of ignorance or lack of a sense of responsibility for their speeches—applied such a device. Everyone knows that if a trader pays rent for a commercial premises, then he includes it in the price of those goods that he sells in this premises. The same applies to the payment of trade tax, etc. So, the statistical conjurers made an assumption, which they modestly did not emphasize in their speeches, that the merchant does not include in the price of the goods sold either the rent for the premises or the trade tax, etc. Good‐natured merchant in the USSR —unlike merchants all over the world— as if he did not pass on to the consumer all the costs that are necessary for the sale of goods.

Now, in the report already mentioned, the Peopleʹs Commissariat of Finance of the USSR has developed data on the actual taxation of private capital, taking into account the transferable and non‐transferable part of taxes, rent and other payments up to and including ʺvoluntary feesʺ.

If we take the entire income of the bourgeoisie (with income, from credit capital, smuggling, etc.), without even taking into account the incomplete calculation of transferability, then the real burden of taxation for private capital in 1925/26 will turn out to be even only about 18% of its income. But in any case, 26% according to the Narkomfin calculation, or 18% according to my calculation, which more fully takes into account income, all this is extremely far from those fantastic 70, 80 and even 90% that more than once walked through the pages of our press.

If the pictures that were painted to us about the complete unbearability of taxes for the capitalists were correct, these same capitalists would have closed their wholesale enterprises long ago. But, as we have seen, taxes were really heavy not for them, but for the very small ones ‐ peddlers, small retailers, etc., for whom the burden of taxation is three times greater than its burden for the largest merchants (see above). These petty people did sometimes go bankrupt (especially handicraftsmen, etc.), while the big capitalists usually only diverted their funds from the trade in textiles to buying up handicrafts, etc.

The second circumstance on which it is necessary to dwell in connection with the question of the taxation of private capital is the question of the connection between the amount of taxes and the present high cost in the USSR. Private merchants and their ideologists (as well as elements susceptible to their influence) usually try to shift the responsibility for the high cost of goods in private trade onto the Soviet government: it allegedly imposes too high taxes.

In fact, the entire severity of the taxation in relation to the price of goods, and especially the difference in this severity between the taxation of private and cooperative trade, is so small that it is absolutely impossible to explain the high cost of goods in private trade compared to cooperative trade by it. A much more significant role is played by the increased profit of the private

trader in comparison with the level of cooperative profit. The absence of a decisive significance of our level of taxes for the modern high cost of private trade has been proved twice in recent years by experimental means (experimentally). The official figures have been cited above, showing that in 1925/26 the severity of the taxation of private trade was lowered. And the high cost of private trade, as the indices show, has increased this year. On the contrary, in the following year, 1926/27, the burden of taxing private capital was increased. And for the first time in a long time, the high cost of private trade in industrial products ceased to grow, and in the first half of 1926/27 even somewhat decreased. Of course, it does not follow from this that it is worth raising taxes, as it is now, everything will become cheaper. But it follows from this that it is not taxes that are playing the decisive role in our country at the present time in the direction of the movement of high prices in the private market. And, therefore, all the nodding at the tax measures of the Soviet government as the root cause of the high cost of private traders‐have no basis, contradict the facts and are the implementation of an alien ideology or an ignorant capitulation to it. that it is not taxes that play with us at the present time a decisive role in the direction of the movement of high prices in the private market. And, therefore, all the nodding at the tax measures of the Soviet government as the root cause of the high cost of private traders‐have no basis, contradict the facts and are the implementation of an alien ideology or an ignorant capitulation to it. that it is not taxes that play with us at the present time the decisive role in the direction of the movement of high prices in the private market. And, therefore, all the nodding at the tax measures of the Soviet government as the root cause of the high cost of private traders‐have no basis, contradict the facts and are the implementation of an alien ideology or an ignorant capitulation to it.

In ʺEconomic Lifeʺ dated April 16, 1927, P. Kutler, an employee of the Narkomfin, compared taxes on private turnover, the amount of this turnover and the amount of retail capes of private traders on wholesale prices in Moscow for two years (half‐year from October 1924 to September 1926). At the same time, all taxes, both non‐transferable and transferable (without any deduction of the transferable part), are fully taken into account here. The result is like this:

Months The ratio of taxes to the amount of turnover of private tradersRetail cape for wholesale prices

October 1924 ‐ March 1925	8.9%	40.3%
April 1926 ‐ September 1926	6.0%	47.5%

The severity of the taxation decreased, and the cape increased. The entire amount of taxation is several times less than the cape alone in retail. The private trader, taking advantage of his position in the market, not only pocketed the difference from the reduction in the burden of taxation, but also increased the capes.

And vice versa: cheaper prices can be achieved without reducing taxes on the private trader, but only by increasing Soviet intervention in the organization of the market, by increasing the share of goods sold by the Soviet way.

The state energetically set about lowering the prices of manufactured goods in its own and cooperative networks and increased the corresponding pressure on private traders. As a result, private traders also lowered prices somewhat, even with a simultaneous increase in taxes on private turnover. And vice versa: cheaper prices can be achieved without reducing taxes on the private trader—f by simply increasing the Soviet interference in the organization of the market, by increasing the share and goods sold by the Soviet way. The state energetically

set about lowering the prices of manufactured goods in its own and cooperative networks and increased the corresponding pressure on private traders. As a result, private traders also lowered prices somewhat, even with a simultaneous increase in taxes on private turnover.

Thus, the absence of a causal connection between our tax rates and the current high prices on the private market has been proven twice in recent years, both directly and inversely. The current level of profit of the capitalist merchants fully permits further continuation of the same line for a simultaneous reduction in the prices they collect from the consumer and an increase in returns‐ the stateʹs share of their income.