Tuesday, October 11, 2005

Is the Flat Tax finally catching on?

Debate about the flat tax is catching on again...and no it does not revolve completely around Steve Forbes (who has a popular new book). But his book and another popular book about a national sales tax have been just part of the debate.

While the flat tax is often considered unlikely in America...other countries around the world are or have actually enacted a flat tax (particularly in fast-growing Eastern Europe). Georgia, Russia, Ukraine, Serbia, Hong Kong, Romania, Slovakia, Estonia, Latvia, and Lithuania all have some sort of flat tax, ranging from 12%-33. All those aforementioned countries have growth in 2004 ranging from 6-12%...far out pacing their neighbors. (Courtesy of a site...that was courtesy of Andrew Sullivan).

Newly elected German Chancellor's chief economic adviser is an advocate of a 25% flat tax in Germany. Will this become the reality? Probably not-to be fair it might have cut the significant lead that she once had in the race.

However, this does show that the flat tax is perhaps a bit more politically viable than it once was. If Germans can run with flat tax, why can't small-government Americans?

How far would conservatives be willing to compromise on a flat tax (if at all-Steve?)?

Would liberals even be willing to consider some form of a Flat Tax without incredible amounts of progressivity?


Blogger Nathan said...

and speaking of conservative compromise...

10/11/2005 12:05 PM  
Blogger Nathan said...

This comment has been removed by a blog administrator.

10/11/2005 12:05 PM  
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10/11/2005 1:03 PM  
Blogger Steve said...

Anything that is less complicated is, in my opinion, much better. The boost from the economy just from a less complicated system is estimated to be worth several % pts of GDP. It would also make it much more difficult for greedy politicians to do favors for special interest groups.

Which leads us the real reason this wlil have difficulty ever passing. If a flat tax were truly adhered to, it would take away the ability of politicians to "get out and do something for group XXX."

Another big problem, which is addressed in the article you posted, is the payroll tax. If you made the income tax completely flat, we really woudl have a regressive system b/c, as a percent of total income, someone making $200,000 would pay much less than someone making $50,000. That probably wouldn't fly, but do we really want to extend the 12% payroll tax to incomes over $90k when they will never see those increased SS benefits? Again, the pay as you go SS system screws us.

10/11/2005 9:25 PM  

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