NCPA - National Center for Policy Analysis

THE WORLD IS FLAT

October 11, 2005

First associated with the likes of Milton Friedman and Steve Forbes, the flat tax is now being contemplated in Greece, where a 25 percent flat-rate income tax would take effect in 2006, replacing a multiple-tier tax structure that has rates of 40 percent and more. The Finance Minister insists that such a flat-tax reform is necessary to reduce a spiraling budget deficit, and that any lost revenue will be recouped "via an overall increase in income."

This brings to 11 the number of nations with a single-rate, postcard tax system. More dominoes are expected to fall in the next few years:

  • Bulgaria, Croatia and Hungary are also preparing to feed their thousands of pages of tax code into the shredder in favor of lower, flatter rates.
  • A flat-tax proposal was debated as part of Poland's recent election campaign.
  • And one of the countries that started it all, Estonia, plans to lower its rate one more time, to 20 percent from 24 percent, which was down from the initial flat rate of 26 percent.
  • Lithuania hopes to go to 24 percent from 33 percent.

Moreover:

  • Russia now reports it gets more revenues from the rich from its 13 percent flat tax than from its pre-existing Swiss cheese tax code with massive evasion and 50 percent-plus tax rates.
  • Russia's revenues with the flat tax grew in real terms by 28 percent in 2001, 21 percent in 2002 and 31 percent in 2003, according to the Hoover Institution.

Hopefully, President Bush's tax reform commission will later this month endorse a simple, broad-based, single-rate tax system, say observers.

Source: Editorial, "The World Is Flat," Wall Street Journal, October 7, 2005.

For text:

http://online.wsj.com/article/SB112864535887162338.html

 

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