ABSTRACT OF PAPER
Title: Sraffa on Taxable Income and its Fiscal Policy Implications
Author: Levrero Enrico Sergio
In debating the definition of capital proposed by Cannan (1989), Fisher (1897, 1898, 1906), Marshall (1890), and Nicholson (1891), as well as Battistella’s (1913), Edgeworth’s (1906), Einaudi’s (1911), Seligman’s (1911) and Stamp’s (1922) works on taxation, Sraffa drew attention to the practice of exempting the subsistence wage from taxation and criticised Fisher, Marshall and Pigou for not following the practice of subtracting from gross income what is needed to replace “the destroyed cells of the labourers” (Einaudi, 1911) when defining net (or taxable) income. This kind of criticism emerges especially in Sraffa’s 1923-26 unpublished manuscripts on Fisher’s definition of net income according to which, unlike the interest rate, ‘net wages’ should be calculated by deducting the ‘disservices’ (that is, labour pain and other discomforts) from the flow of the goods produced given to workers, but not the ‘expenses’ needed to maintain and reproduce them, since net national income should be conceived of as the mass of goods that provides a utility and workers receive satisfaction even from that part of wages which is indispensable for their reproduction, that is, from the subsistence wage. According to Sraffa, Fisher's definition is contradictory since it does not consider that sums and differences of utilities are absurd, and that capitalists also receive benefit from the replacement of their capital so that a coherent definition of net national income should include the ‘depreciation expenses’ for both labour and capital or should exclude those expenses in both cases. A calculation of ‘depreciation expenses’ for labour needs of course a definition of the subsistence (or cost component of) wages which Sraffa analysed in the years 1922-25 looking mainly at the works of Cannan (1917), Loria (1903), Marshall (1890), Pantaleoni (1889), Pigou (1920) and Ricca Salerno (1900). When, in the years 1927-1929, Sraffa succeeded in elaborating his ‘first equations’ and rediscovered the classical surplus approach (see Garegnani, 2005; and Gerkhe&Kurz, 2006), his reflections on the cost and surplus components of wages were enriched by a deeper analysis of Smith’s, Ricardo’s and Marx’s notion of subsistence (see Pivetti, 2000; Picchio, 2011; Levrero, 2013), where the ‘necessary’ or subsistence wage appears to be that able to maintain and reproduce an efficient worker in his normal state as a labouring individual according to the demographic and social-historical conditions of his time. The aim of this paper is to reconstruct Sraffa’s analysis of taxable income and the subsistence wage (sections I and II) and then look at some of its implications for policy analysis — especially with regard to taxation (section III) and the setting of minimum wages and subsidies for the poorest sectors of the population (section IV). It also aims to point out how these kinds of implications are usually traceable (at least, until recently) in the literature on taxation, since, as Sraffa wrote in November 1927, ‘public finance (the only practical part of economics) acts on the theory of the surplus, by necessity’ [D3/12/11-56].
Registred web users only can download this paper - Go back
Please note that files available for download have not been checked for viruses. These files have been submitted by authors of the conference to this web site. Conference organisers can't accept any responsibility for damages caused to users by downloading such files.