Reverse Robin Hood tax policy: Shifting taxes from the rich to the poor

An article of faith in the right wing of the US is that raising taxes is always bad and lowering taxes is always good. In fact, Grover Norquist has made a good living going around getting candidates to sign a pledge that they will never raise taxes, ever, and woe to anyone who breaks such a pledge.

Another article of faith is that governments must always balance their budgets and that deficit spending is a sign of moral laxity.

But like religious articles of faith, these supposedly rigid doctrines turn out to be remarkably flexible in their interpretation, able to be twisted into all manner of contortions that would be a source of envy to Talmudic scholars, that result in them being used to benefit the rich and powerful at the expense of the poor and powerless.

Take taxes. When Republicans get into power, the first thing they do is cut income tax rates and usually they cut them in such a way that they benefit the rich far more than they benefit the poor. But opposition to this move is muted since everyone’s income taxes is reduced, at least by a bit, and who wants to argue against that other than crazy leftists who argue that we need taxes in order to provide for the collective good and that having more money in our own pockets does not necessarily mean that we have a better quality of life?

Of course, cutting tax rates means that revenues go down and deficits will increase, seemingly violating their other article of faith that budgets must always be balanced. But not to worry! A third article of faith is that cutting taxes will stimulate growth that will increase tax revenues even at the lower rates, and thus not only balance the budget but even produce surpluses. So everyone wins!

Of course, this magical thinking (that comes under various guises but is most popularly associated with economist Arthur Laffer and is known as the Laffer curve) is perpetrated by right-wing ideologues in order to persuade the rubes that what is good for the wealthy is good for everyone. But when those increased revenues fail to materialize and budgets go seriously out of whack, what they do is increase taxes again but not on income. Instead they raise sales taxes on basic goods and services and since these taxes fall disproportionately on the poor, voila! we have shifted taxes from the rich to the poor and balanced the budget on their backs. Kansas is the latest state to go through this bait and switch.

All calls for a flat tax system are part of this scam. People who advocate for this argue that the current tax system is very complicated and a flat tax will make things simple. It is true that the tax system is enormously complex but progressive tax rates are not the problem. There is nothing at all complicated about having a progressive income tax structure that has increasing marginal rates as you go to higher income levels. Even if you are seriously math-deficient, you don’t have to actually do any calculations because you can just read off your tax from a table. What makes the tax system complicated are the enormous number of other features and loopholes that have over time become part of the tax code as the tax system has been used to advance certain policies and cater to special interest lobbies.

Republican presidential candidate Rand Paul’s proposal for a 14.5% flat tax is part of this flimflam. Under the guise of ‘simplifying’ the tax code by having everyone pay the same flat rate, this is a huge tax cut for the wealthy. Right now, even I pay an effective tax rate that is higher than 14.5% of my gross income and Paul’s plan would give me a huge tax cut which I definitely neither want nor deserve. Jeb Bush has released his tax returns and he has reportedly paid at an effective rate of 36% on his multi-million dollar income, so he would get a massive tax cut. You can only imagine how much the wealthy will benefit from Paul’s plan. Even conservatives like Ramesh Ponnuru have pointed out the problems with Paul’s plan.

On his presidential campaign website, Paul says, “I propose we cut taxes for everyone — rich and poor.” He delivers on at least the first half of that promise. The net effect of Paul’s plan is that the top tax rate on labor income falls from its current 43.4 percent to 26.9 percent. Taxes on capital gains and dividends would fall to 14.5 percent, and taxes on estates to zero.

Paul has said that the plan “shows that we have something that we can offer to the working class.” For the middle class, however, the plan looks like a wash: What middle-income households no longer owe in payroll taxes they’ll pay in hidden consumption taxes.

Paul’s plan will inevitably lead to a huge deficit, estimated at $3 trillion over ten years. That deficit will then be used to serve two goals. One is to use it, under the guise of ‘efficiency’ and ‘cutting waste’, to get rid of all the regulatory agencies that big businesses consider irksome but provide protections for the environment and services for the many. The other is to raise fees and sales taxes that that will hit the broad masses of people, so that once again, taxes are shifted from the rich to the poor.

In the current climate, any calls for ‘tax reform’ should be viewed with great suspicion. A call for a flat tax does not even need any consideration. A flat tax proposal is always, always, a scam to get the rich to pay less and should be rejected out of hand.


  1. says

    When Thatcher came in in 1979 she cut income tax and almost doubled VAT (sales tax). I found it amazing even then how few people seemed to realise the reactionary nature of this strategy. Plus la change.


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