Robin Hood

Arguments that espouse taking from the rich and giving to the poor act as if this is a zero sum game being played. Under this frame of mind you can take surplus from the rich and give it to the poor and the total income of the population will not change. However, we know that at some point increasing taxes will reduce the incentive to work and thus decrease output. On the other side of this math giving more of the tax taken from the rich will not increase the poor’s output. Thus the more you tax the rich to give to the poor the lower will be aggregate income.

This argument also can illuminate potential positive effects on society: pure supply and demand theory tells us that the less you tax work, the more of it you will get. More work will produce more aggregate income. Thus reducing taxes on the rich may be a better way to improve aggregate income than the opposite. Increased demand for goods and services created by this increased aggregate income should increase the demand for, and thus the pay to, the working poor. Any argument that favors direct transfers from rich to poor should consider this relationship before concluding that we all will be better off.

This entry was posted in Economics and tagged . Bookmark the permalink.

One Response to Robin Hood

  1. Taxing the rich and giving to the poor also assumes that once the money is in the hands of the government, that it will go directly to the benefit of the poor and not simply be added to the general fund to earmark and fritter away in the usual way by the ‘brains’ in Congress.

Leave a Reply