Flat Tax all the way baby

mkpdavies · 11-10-2005, 04:51 PM

http://www.iris.org.il/blog/archives...wth-Rates.html

Quote:

I believe this is one of the biggest pieces of economic news ever. Milton Friedman's single-postcard flat tax idea has finally started catching on (ten Eastern European countries, with four more in Europe close to adoption). 2004 GDP growth rates there averaged a staggering 8%, well over twice the industrialized nations' average of 3.4%. Of course these flat tax rates vary widely, from 12-33%. Among the six lowest-taxed countries, growth rates are the highest: 8.6%. The lowest-taxed three have 9.5% growth.

Georgia (12% tax rate, 9.5% growth-est.)
Russia (13% tax rate, 7.1% growth)
Ukraine (13% tax rate, 12% growth-est.)
Serbia (14% tax rate, 7% growth)
Hong Kong (16% tax rate, 8.1% growth)
Romania (16% tax rate, 8.1% growth-est.)
Slovakia (19% tax rate, 5.3% growth-est.)
Estonia (24% tax rate, 6% growth-est.)
Latvia (25% tax rate, 7.6% growth-est.)
Lithuania (33% tax rate, 6.6% growth-est.)

Notice, lower the rate, higher the growth. It aint rocket science is it!

Aardvark · 11-10-2005, 08:06 PM

It's not rocket science, but it is economics.

All the countries cited, with the exception of Hong Kong, were until recently post-Soviet/Yugoslav basket cases. They should all be growing rapidly in any event; it would be a tragedy for their people if they weren't. Their economies are moving from dated command systems to modern liberal economies. Hong Kong is a special case because it is linked to the phenomenal transformation of the Chinese economy that is shipping its goods through the better developed port and airport facilities HK offers.

That said, I favour a flat tax because it allows the Chancellor of the exchequer of any party to accurately predict the effect of marginal movements of tax rates. It would reduce the need for a large number of economists at the Treasury and would cut the number of tax collectors and tax accountants. At present a 1% cut in income tax at the bottom end has virtually no effect unless coupled to a change in rates of housing or other benefits. If you cut 1p off tax the housing benefit is reduced by the 1p the claimant gets. This is patently stupid since it is the people at the bottom who should be extracted from the tax system altogether.

The rate at which income tax is paid should be reduced to a standard amount on all earnings above a very high threshhold (say £10K). There would be less need for benefits (a system that the Works and Pensions Secretary has just described as crackers), less need for all sorts of fudges and fiddles and more incentive for people to earn since they wouldn't be paying tax. Employers would certainly not need to recruit low paid migrant workers if the locals were pushed out of the benefits system and back to work. Pensioners would largely be extracted from the system of taxation.

I think that if we had a flat tax in our modern economy we would see growth rates that would be sustainable over a long period.

Biscuitman · 11-10-2005, 08:26 PM

Quote:

It would reduce the need for a large number of economists at the Treasury and would cut the number of tax collectors and tax accountants

There are two problems to be over come with flat tax:-

Delivering it in a way that the voter can understand and that they trust the message bearer.

Secondly, there is an army of vested interests to overcome.

However, cutting corporation tax gets big business - including the media moguls on side.[/quote]

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11-10-2005, 08:06 PM	#2 (permalink)
Aardvark Moderator Join Date: Dec 2004 Location: Oxonia Posts: 3,987	It's not rocket science, but it is economics. All the countries cited, with the exception of Hong Kong, were until recently post-Soviet/Yugoslav basket cases. They should all be growing rapidly in any event; it would be a tragedy for their people if they weren't. Their economies are moving from dated command systems to modern liberal economies. Hong Kong is a special case because it is linked to the phenomenal transformation of the Chinese economy that is shipping its goods through the better developed port and airport facilities HK offers. That said, I favour a flat tax because it allows the Chancellor of the exchequer of any party to accurately predict the effect of marginal movements of tax rates. It would reduce the need for a large number of economists at the Treasury and would cut the number of tax collectors and tax accountants. At present a 1% cut in income tax at the bottom end has virtually no effect unless coupled to a change in rates of housing or other benefits. If you cut 1p off tax the housing benefit is reduced by the 1p the claimant gets. This is patently stupid since it is the people at the bottom who should be extracted from the tax system altogether. The rate at which income tax is paid should be reduced to a standard amount on all earnings above a very high threshhold (say £10K). There would be less need for benefits (a system that the Works and Pensions Secretary has just described as crackers), less need for all sorts of fudges and fiddles and more incentive for people to earn since they wouldn't be paying tax. Employers would certainly not need to recruit low paid migrant workers if the locals were pushed out of the benefits system and back to work. Pensioners would largely be extracted from the system of taxation. I think that if we had a flat tax in our modern economy we would see growth rates that would be sustainable over a long period.