"The World Is Flat" - In Taxes, That Is

Here's another interesting update on "what went right" in Eastern Europe. Following the example of Estonia—whose prime minister thought, erroneously, that he was emulating the West—the formerly Communist nations of Eastern Europe are now competing with each other to adopt a flat tax, and to do so at the lowest rate, with the lowest tax rate now being a flat tax of nine percent.

"The World Is Flattening," Investor's Business Daily, September 25 In a free-market revolution sweeping central and eastern Europe, Albania and Bulgaria will become the latest ex-communist states to embrace a low-rate flat tax.

It began with Estonia in 1994, when Mart Laar as prime minister, thinking he was just emulating the capitalist West, made it the world's first nation in modern times to enact a flat tax. A major fiscal crisis resulting from the collapse of the Soviet Union was soon fixed, Estonia was growing at 7% a year and the "Baltic Tiger" was born….

Since 1994, Estonia's flax tax rate has decreased steadily from an original 26% to its current 22%. It applies to all personal and corporate income with no deductions….

"It seemed common sense to me," Laar recalled of instituting the flat tax, "and, as I thought it had already been done everywhere, I simply introduced it in Estonia, despite warnings from Estonian economists that it could not be done….

Latvia and Lithuania [followed], both at rates of about 25%. Then Russia in 2001 enacted a flat tax on personal income at 13%; revenues doubled there in less than three years.

Serbia followed in 2003 with a 14% flat rate. Ukraine set its flat tax at 13% in 2004.
Slovakia activated its 19% flat rate the same year. Romania's flat tax was pegged at 16% in 2005.

Georgia outdid them all, passing a 12% flat tax into law on an overwhelming parliamentary vote just before Christmas 2004. Macedonia's flat tax rate, inaugurated this year, is also 12%....

It is in the midst of this revolutionary fervor that Albania and Bulgaria will give the go-ahead to a 10% flat tax next year while the Czech Republic will begin enjoying a flat rate of 15% in 2008. Then there's the small nation of Montenegro, which actually plans a 9% flat tax in 2010….

At the 1984 Republican convention in Dallas that renominated Ronald Reagan, GOP politicians were laughed at for wearing large, green "10 Percent Flat Tax" buttons. The idea may have been too radical for America back then (maybe now, too), but that's exactly what is being fervently embraced by people victimized for much of their lives by undiluted Marxist economics.