Featured image of post Are you middle class? You don't want any tax increase, huh!? Are you sure?
Featured image of post Are you middle class? You don't want any tax increase, huh!? Are you sure?

Are you middle class? You don't want any tax increase, huh!? Are you sure?

When the wolf gives advice to the sheep

At the beginning of this month, The Spanish Confederation of Business Organizations (CEOE) advised the media not to talk about in terms of rich and poor because it could create social instability. I couldn’t agree more. Given the current socioeconomic situation, if you allow people to think about where they stand, you risk getting them upset. I really don’t want to get anybody upset. So I am going to stay neutral and start talking about the middle class.

And I wonder. Who is the middle class?

When you search for a concept, you often find many definitions, but in most cases, these definitions differ in only small details.

However, in the case of the middle class, we can see how its definition has changed a great deal over time. If we think of it as the middle point between the upper and the lower classes, we end up with many questions. The upper class are those who don’t need to work as they own a fair amount of capital and they hold property of production means which are run by employees. In contraposition, the lower class needs to sell their labour power in order to get the minimum capital required to survive. That’s why it is called the working class. So, as Marx and Engels defined, and so anybody that knows how to draw the middle point on a line, it is wise to assume that the middle class are those who own the bare minimum property of production means, but they are still required to work as to keep it generating capital. I would like to put some emphasis on owning the production means because this particularity makes a huge difference.

Searching to gather an impression of what nowadays is understood as the middle class, I opened an article from Investopedia (the standard website for many people interested in finance) in which Adam Hayes offers a completely different definition. I could do nothing but become incensed. Here is a portion of their explanation:

Middle-class families tend to own their own home (although with a mortgage), own a car (although with a loan or lease), send their kids to college (although with student loans or scholarships), are saving for retirement, and have enough disposable savings to afford certain luxuries like dining out and vacations.

Middle class families tend to own their own home (although with a mortgage)

Correct me if I am wrong, but paying for a mortgage is not the same as owning a house. It might be better than paying rent, but it definitely means that you do not own a house yet. And as far as I know, having an adequate roof over our heads is nothing more than a sign of a decent and dignified life.

own a car (although with a loan or lease)

A car is often a requirement to work. If they want to make money, many people are bound to use one. Both in Europe and in America, the average price for used vehicles is slightly above 20,000 euros/dollars. Does it make sense that a middle-class citizen needs a loan to pay for that?

send their kids to college (although with student loans or scholarships)

Education is not an extra; it is not some hobby. An educated society is less violent. Educated citizens are the ones who fight against pandemics or create amazing technology. A university loan is a mortgage for the student. A scholarship is a reward for the student’s excellence. None of them is a direct perk of the middle class.

are saving for retirement

Who doesn’t have in their mind to save for retirement? I will tell you who. Those who need to pay a mortgage, a car lease and a student loan.

and have enough disposable savings to afford certain luxuries like dining out and vacations.

Apparently, getting pizza every Friday and going to the beach for a week in summer are luxuries. Who needs a break? Certainly not human beings.

In his definition of the middle class, Hayes doesn’t even mention the means of production, which are the most important pillar when it comes to talking about social structure. If you don’t own your house, you don’t own your workshop, you don’t own your car, and you don’t have money (capital) to invest in your children’s education, are you really anywhere near the middle?

Global shareholders of wealth by wealth group, Credit Suisse, 2021

From this graphic, we take that 11% of the population has more than $100k in property, and therefore they are middle class. But I wonder, where do you find a house that costs about $100K? Which factory or shop can you afford? Who can actually own anything if you don’t have at least up to $250K? The minimum required to belong in the middle class, shouldn’t it be, at least, the amount needed to purchase a house? How far would that 11% shrink? 5%? 6%?

I thought that the middle class was supposed to be a group of people that don’t live surrounded by gold but do have real financial security. This is a situation in which you can take a health break and not panic because you and your family will struggle. Otherwise, what’s the difference between a middle-class and a working-class citizen?

The difference is becoming more subtle every day.

If you are a middle-class citizen, you might think that most of your interests lie right next to the upper class. You might think that if you were to pay fewer taxes, you would be able to save more money and eventually go up the ladder a few steps. Many people think that way. Many people vote for politicians who claim lowering taxes will solve our issues. And it would be an appealing idea if it only it was true.

In the last decades, the USA has predominately followed a philosophy of tax resistance. It is not surprising that there is not much of a safety net for regular citizens. In the European continent, taxes are much higher, and so are the social benefits applied to vulnerable citizens. In any case, the discussion about taxation is a popular subject.

In the UK, they have recently been juggling with it. First, reducing the tax requirement for the super-rich overseas people on the bases of attracting more wealthy people to the country. As anticipated by the sceptical, the UK government lost £3.2bn in annual tax revenue. Then, when it struggled to meet its obligations, the government retreated to its previous tax rules. Only the super-rich (1%) benefited: big companies with already enough capital and power. The middle class and other ordinary taxpayers saw how their welfare state deteriorated while the energy bill and groceries became dangerously unaffordable. After witnessing this embarrassing performance, UK’s economy has lost reliability and power.

On the other side of the coin is Spain; the Budget Minister recently announced new tax rules for 2023. In this case, the tax cuts will favour small businesses, the self-employed, and workers earning less than €21,000 ($20,490) a year. It directly affects 1.344.000 ordinary taxpayers, people who are struggling with the burdens of inflation and the energy crisis. These measures will lift some of that weight off their shoulders. The government will have the capacity to afford it thanks to the implementation of a “solidarity tax” on people with assets worth at least €3 million. The new tax disturbs only 23,000 citizens (0.1% of the population) and has the potential to collect €1.5 billion.

BussinesEurope (the European employers’ association) seems to be so concerned with the new taxation that they had to send a letter to some members of the European Government. But why?

“The class war never ends, the masters never relent.” — Noah Chomsky

I don’t think it is because they worry about the middle class, much less about the working class. A good deal of the people from BussinessEurope and the CEOE belong to the 1% shown in the bar chart previously displayed, and they are not to be trusted when it comes to standard citizens’ interests. As I said earlier, if you identify as a middle-class citizen, you might think your interests are aligned with theirs, but I hope you can now see that lowering taxes is not always to your benefit.

We often hear the freedom argument. “Taxes are restrictions and, therefore, reduce my liberty.” If you truly want to be free, you need a state to protect you. An organization that watches for justice and provides for your weakest moments. Without a funded state, we are not living in freedom we are living in the jungle, where the strongest (the rich) will do whatever they want.

The current situation of climate change is a clear example. The average taxpayer can’t do much about it. Only a big organization can make the big changes we need. But, if that big organization is private and has private interests, it is not going to find the motivation to care about the environment. They are going to keep polluting because it is indeed profitable. They are going to keep destroying the Earth because they have already built their little oasis where only a few will be safe. For that, we need the state, a well-funded state that can protect the common interest of the public.

When the base of a pyramid is robust, you have more chances to keep your status. The middle class is disappearing by the minute, and the working class is turning into plain poor. Think about it. If you were to slip and fall or even be pushed down, rising from the solid ground is much easier than emerging from shifting sands. Tax contributions are the stones that build our future. At the moment, our future is owned by a few, and none of them is middle class.

“We live in capitalism. Its power seems inescapable. So did the divine right of kings.” ― Ursula K. Le Guin

The Spanish Confederation of Business Organizations (CEOE) doesn’t want us to talk about the rich and the poor because it wants people to believe they can become part of the middle class and have a comfortable future. Actually, the middle class is on the brink of extinction, and the lower class is confronting harsher living conditions. Those with economic power want us to dream we can become them because while we do so, we don’t bother them. But we are far away from them, and we will be even further if we don’t force them to pay higher taxes.

Let’s make them pay taxes for all the damage they’ve done in the name of profit. Furthermore, they have plenty of money to get out and go to space. So, as Trump says: “If they don’t like it here, they can leave.

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