Why Taxing the Rich Doesn't Work

There’s an old fable in English folklore in which a man, born of humble beginnings - in the forests of Nottingham with his ‘merry men’ - sets out to forcefully take from the men of a more noble background and upkeep and give it to the ones in the surrounding areas of deprivation. The tale of Robin Hood, the colloquial version at least, offers a subtle similarity with the current zeitgeist of contemporary Western society. These lies are the ones that contradict completely, the pillars upon which it was built and founded upon. The idea that stealing from the rich, which is exactly what taxation is in any form, and giving to the poor will somehow stimulate economic growth and reduce inequality contains fallacies aplenty. 

Firsty, if we are to believe that extreme wealth, if not fettered, is harmful to the ones worst off in society, then we are immediately contradicting how wealth is created and utilised in the first place. To create wealth, in any market-oriented system, you must provide some service or good that people need. As observed by any sentient human, a financial transaction is voluntary in which both people profit - the customer in the utility of the good/service, the producer in the literal financial gain. So to tax this on the extreme side would be perverse as it would disincentivise market competition which drives prices down. More importantly, if you tax those at the top, the employees that they manage will tend to bear that burden, typically in the form of job layoffs. 

And of course, the effects of this have been demonstrated time after time. Countries in which the tax system is most aggressive often have some of the highest emigration figures. This is happening in the UK already. In 2024, no doubt due to Labour’s tax hikes, over 9,000 millionaires were estimated to have left which more than doubled on the estimated 4,200 who left in 2023. 

On top of this, investment is almost guaranteed to drop subsequently. Take Colombia, who in 2022 raised the corporate tax rate to 35% and an extra 10% wealth tax on net assets above $700,000 USD or £547,820 GBP. Following this, Foreign Direct Investment (FDI) inflows fell sharply from $14.5 billion in 2021 to $9.4 billion in 2023 (UNCTAD), a 35% drop. This type of much needed investment for any economy often promotes job creation and adds to the ‘multiplier effect’, something that high taxation deters. 

Yet, despite all of this, the neo-Robin-Hooders of our time such as the Bernie Sanders and Gary Stevensons of this world constantly espouse that, in order to help those at the bottom, the top must pay. Has the thought of encouraging some personal-responsibility ever crossed their minds? Of course, some people literally can’t go to work. But certainly here at least, in the UK, according to the latest figures from 2023, more than 22 million people claim welfare of some sort. Even more startling is the number of people who are of working age and don’t work, which is currently close to 10 million people - nearly a quarter of the working population (16-64 year olds). So apparently, the solution to solve Britain's wealth inequality epidemic is to give those who don’t contribute to the economy - more money. I.e rewarding those who don’t work, by taking from those who do. 

But surely the sheer volume of people doing nout all day in Britain has to be an incentive to cut welfare.

Unfortunately, those down in Westminster care very little about this. They are more bothered about the latest Netflix series ‘Adolescence’, something that very few of the members of the commons seem to have reached, at least when it comes to actually addressing real problems like say, the national debt or the matter at hand.

So just remember that as appealing as taxing the rich may be, the consequences are dire to a country’s economic outlook. Not only is it a lazy solution to a far deeper running issue, it cannot be solved simply by transferring more money from one group of people to another. It incentivises laziness and deters people from the UK.