Russia's Flat Tax Reform
March 6, 2002
This year Americans will pay accountants and attorneys $140 billion to do their taxes and help them navigate the 46,000-page U.S. Tax Code. Too bad, observers say, this isn't Russia.
- Since January 1, 2001, Russians have enjoyed a 13 percent flat tax.
- Even the old Russian system was simpler than ours, with three tax rates - 12, 20 and 30 percent.
- The U.S. has six -- 6, 10, 15, 27, 30, 35 and 38.6 percent, the last of which takes hold at $307,500 for married couples filing jointly.
The majority of Russian taxpayers don't need to file forms. The 13 percent rate has exceeded expectations in terms of revenue, as real ruble revenue increased 28 percent
- Three years ago, tax revenue equaled 9 to 10 percent of Russian gross domestic product.
- By last November that had grown to 16 percent as result following the Laffer Curve: lower marginal tax rates produce higher revenues.
- The new system has also greatly reduced the underground economy, where people were paid in goods rather than cash to facilitate tax evasion.
In other pro-market moves, President Vladimir Putin has signed legislation to cut the corporate tax rate from 35 to 24 percent. The Kremlin may also offer Russians privately invested social security accounts, much as President Bush wants for Americans.
As one observer has noted, V.I. Lenin, analyzing all this from his dacha in hell, must be stroking his beard in utter bewilderment.
Source: Deroy Murdock, "Even Russia Realized the Wisdom of a Flat Tax," Dallas Morning News, March 4, 2002.
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