Sraffa on taxable income and its implications for fiscal policy

The aim of this paper is to reconstruct Sraffa’s analysis of taxable income and the subsistence wage as traceable in his unpublished manuscripts and then look at some of its implications for policy analysis—especially with regard to taxation and an operational setting of minimum wages and subsidies for the poorest sectors of the population. 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’.