Tuesday, February 22, 2005

Former Soviet Satellites Go For Flat Tax

The Boston Globe has an article headlined "Eastern Europe embraces flat tax." Link.
In an effort to boost their economies and attract investors, governments from Bucharest to Moscow to Belgrade have instituted simplified personal flat income tax rates in recent years. So far, nine former communist countries have adopted the flat tax, including two who did so this year, with pressure mounting for others in the region to follow suit.

The result, in countries where data are available, has been a marked decline in tax dodging, a sharp increase in government revenues, and higher economic growth.

That is exactly what the Supply Siders said would happen when you lower high marginal tax rates. The liberal media, all Democrats and many Republicans still do not accept the simple fact that government revenues rise when high marginal rates are cut. Unfortunately, when cut rates led to sharply higher revenues under Reagan and Bush the younger, Congress increased spending at an even faster rate, leading to deficits that the media continue to blame on what they call "tax cuts." Actually they were tax increases in the form of tax rate cuts.


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