The Robin Hood effect is an economic phenomenon due to the fact that income will be redistributed in such a way that economic inequality decreases. The effect is named after Robin Hood , who said that he was forced to steal from the rich to give to the poor.
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Causes of the Robin Hood effect
The Robin Hood effect can be caused by a large number of different strategies or economic decisions, not all of which are aimed at reducing inequality. This article lists only a few of them.
Natural National Development
Simon Kuznets (Simon Kuznets) argued that one of the main factors determining the level of economic inequality is the stage of economic development of the country. The blacksmith described the curve as the relationship between income and inequality, as shown in the figure. This theory says that countries with very low levels of development have a relatively equal distribution of wealth.
As a country develops, it will necessarily acquire more capital, and the owners of this capital will have more wealth and income, which creates inequality. Ultimately, however, various possible redistribution mechanisms, such as the “trickle down effects” and social programs, lead to the Robin Hood effect, when wealth is redistributed to the poor. Therefore, more developed countries will inevitably return to lower levels of inequality.
Disproportionate income tax
Many countries have tax systems where low salaries are taxed very low (or not taxed at all), and those with higher salaries must pay a higher income tax rate over a certain threshold, known as progressive taxation . This leads to the effect: a better-off population pays a higher share of its salary to the tax, effectively subsidizing the less wealthy, which leads to the Robin Hood effect.
In particular, a progressive tax is a tax at which the tax rate increases as the tax base increases and the amount increases [1] [2] [3] [4] [5] . “Progressiveness” means the distribution of influence on income or expenses , appealing to how the level progresses from low to high, where the average tax rate is less than the marginal tax rate [6] [7] ; it can be applied to individual taxes or the tax system as a whole: annual, multi-year, or lifelong. The goal of progressive taxes is to try to reduce the tax burden for people with less ability to pay them , as they move this load towards more affluent people.
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Examples
See also
- Redistribution of Income (Income redistribution)
- Distribution of wealth (English)
- Economic inequality
- Federal taxation and spending by state (English)
- Robin Hood
- Robin Hood tax
Notes
- ↑ Webster (4b): increasing in rate as the base increases (a progressive tax)
- ↑ American Heritage Archived April 12, 2001. (6). Increasing in rate as the taxable amount increases.
- ↑ Britannica Concise Encyclopedia : Tax levied at a rate that increases as the quantity subject to taxation increases.
- ↑ Princeton University WordNet (link not available) : (n) progressive tax (any tax in which the rate increases as the amount subject to taxation increases)
- ↑ Sommerfeld, Ray M., Silvia A. Madeo, Kenneth E. Anderson, Betty R. Jackson (1992), Concepts of Taxation , Dryden Press: Fort Worth, TX
- ↑ Hyman, David M. (1990) Public Finance: A Contemporary Application of Theory to Policy , 3rd, Dryden Press: Chicago, IL
- ↑ James, Simon (1998) A Dictionary of Taxation , Edgar Elgar Publishing Limited: Northampton, MA