The World is Flat

The Wall Street Journal ^ | October 7, 2005 | Editorial

[groanup]

The World Is Flat

October 7, 2005

Sooner or later it had to happen: The mainstream press is finally discovering the flat-tax movement that has been sweeping Europe. It must be painful to credit an idea associated with the likes of Milton Friedman and Steve Forbes, but reality can't be ignored forever.

The latest news is that the government of Greece is contemplating a 25% flat-rate income tax to take effect in 2006, replacing a multiple-tier tax structure with rates of 40% or more. The Finance Minister insists that such a flat-tax reform is necessary to reduce a spiraling budget deficit, and that any lost revenue will be recouped "via an overall increase in income."

By our count, this brings to 11 the number of nations with a single-rate, postcard tax system. More dominoes are expected to fall in the next few years: Bulgaria, Croatia and Hungary are also preparing to feed their thousands of pages of tax code into the shredder in favor of lower, flatter rates. A flat-tax proposal was debated as part of Poland's recent election campaign. And one of the countries that started it all, Estonia, plans to lower its rate one more time, to 20% from 24%, which was down from the initial flat rate of 26%. Lithuania hopes to go to 24% from 33%.

As shown in the nearby table, most of the world's flat-tax nations today are the former Iron Curtain nations, which for 50 years attempted to create a workers' paradise through command-and-control economic systems. Many of these nations have swung full circle in the opposite, free-enterprise direction. Daniel Mitchell, chief economist at the Heritage Foundation, notes that Greece's decision would make it the first non-former communist European nation to adopt the flat tax. East Europe is exporting its economic system westward after all, but not in the way Nikita Khrushchev ever could have imagined.

In response, even Old Europe has had to consider tax reform, lest its economies become increasingly uncompetitive. Rather than catching the flat-tax wave, France, Germany and Italy have been attempting to stop it by outlawing tax competition through international entities, such as the OECD, the European Union and United Nations.

[groanup]

Taxes=lower GDP

This is a snip from today's WSJ and it is on a pay site. You get the idea anyway.

[groanup]

Sorry, the link's bad. Should be:

http://online.wsj.com/home/us

[groanup]

ping list

[Bhrian]

Fairtax makes more sense. No income taxes of any sort, only a VAT style of tax on purchases of new items.

No more IRS, no more tax/welfare deductions from your paycheck.

www.fairtax.org

[groanup]

I agree

[cotton1706]

I prefer the fairtax too but will gladly take a flat tax over what we have currently. The 16th amendment needs to be repealed.

[BenLurkin]

Rush Limbaugh took my call on the air some years ago. I told him he was wrong about the flat tax.

Rush pointed out that the rate then proposed was not significantly more or less than the effective rate paid by most people filing a 1040.

Yes Rush, I said, I understand that. The problem is that the initial rate may be fifteen or seventeen percent -- but there is every reason to expect that rate to increase little by little until Congress was gouging us for 18, 20 or 25 percent! It would only be a matter of time I guaranty you.

The big government big spenders know well that the tax payin frogs never notice they are being boiled.

[Remember_Salamis]

The Economist (pay articles) ran a series of articles on the Global Flat Tax Revolution a few months back. I posted most of them, so search my articles.

[seppel]

Unfortunately our opportunistic, Muslim-hugging playboy prez. Schröder ripped the flat-tax plan of the conservatives (developed by Germany Supreme Court judge Prof. Kirchoff) and by doing so managed to get his bunch of crony socialists into a grand coalition. German population does not want it even if it works in Switzerland and Czechoslovakia.

The joke is the Czech finance minister got his primary ideas of Prof. Kirchoffs website. But Schröder maintains it cannot work!

You need the right population for it. Germans like their gov. handouts too much - 41% are on the dole in some way or another.

[ancient_geezer]

Interesting they don't mention the fact that in the EU, "Flat Tax" comes down to a wage tax with VAT.

Nor have I seen anything in the MSM about Russia being on its way to the next step in their transition towards a visible and open sales tax system. Seems they are in the process of scrapping their VAT and going to a straight retail sales tax instead.

NOVISTI
9-29-2005
http://en.rian.ru/business/20050928/41534170.html

• MOSCOW, September 28 (RIA Novosti) -- Head of the Russian Presidential Administration's Expert Board told journalists Wednesday on the sidelines of an investment conference in Moscow that the new sales tax instated to replace VAT will not be introduced before 2009.

• "The projections have been made and the text (of the proposal) is ready," Arkady Dvorkovich said, referring to the proposals that will be submitted to the cabinet.

• VAT and sales tax are variations of turnover tax, but, whereas VAT is collected as a product moves down the line from producer to end consumer, sales tax is a consumption tax that is collected only once, at the point of purchase.

Is Russia followed by Europe, on its way to actually implementing the potential of National Retail Sales Tax only systems before us?

[ancient_geezer]

A Taxreform bump for you all.

If you would like to be added to this ping list let me know.

John Linder in the House(HR25) & Saxby Chambliss Senate(S25) offer a comprehensive bill to kill all income and SS/Medicare payroll taxes outright and replace them with with a national retail sales tax administered by the states.

H.R.25,S.25
A bill to promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national retail sales tax to be administered primarily by the States.

Refer for additional information:

• search: "national sales tax" OR "national retail sales tax" OR "fairtax"

[pigdog]

Seems like this is another "taking down of the Berlin Wall" except that the Russians are trying to get ahead of the game by beating us to it.

We'd best get busy and pass the FairTax into law to beat them to it. No point in being second on something like this when it is so beneficial to the economy.

[groanup]

Interesting they don't mention the fact that in the EU, "Flat Tax" comes down to a wage tax with VAT.

If there is a single person in the MSM that understands the various tax schemes in use globally he/she has not outed himself. The good news is that the WSJ is reporting that the MSM is finally noticing the flat tax schemes sweeping the old USSR. At least it's a start. One can say that one must crawl before walking.

[VRWCmember]

No income taxes of any sort, only a VAT style of tax on purchases of new items.

VAT is a hidden tax that is very easy for politicians to raise. Europe has a VAT and it also has confiscatory income taxes. If VAT were the answer, Europe would need its confiscatory income taxes.

[Bigun]

Gotta watch it when ya do those links ya know! No tellin who might show up here! ;>)

[Bigun]

How about we just forget about taxing the wrong end of the spectrum (income) entirely and tax articles of consumption instead as the founders universially suggested!

http//www.fairtax.org

[grey_whiskers]

Just a thought--when you tax something, you get less of it.

So eliminating income tax, but taxing goods at retail, would increase employment, and also move us further to a services based economy...

Hmmm...

[Bigun]

Read the information at the link I posted and then get back to me.

[groanup]

It's true that when you tax a form of income then people will shift their income to another form if at all possible. It is also true that if you tax consumption of a certain kind (final retail) you'll get less of it. But it is also true that sooner or later Americans will run out of used stuff and and sooner or later Americans will revert to their old habits of wanting to be the first on their block to HAVE ONE.

BTW, the fair tax taxes services.

[ancient_geezer]

It's true that when you tax a form of income then people will shift their income to another form if at all possible. It is also true that if you tax consumption of a certain kind (final retail) you'll get less of it.

More importantly if one visibly taxes all final consumption including services, (not just a certain kind) and do not tax savings or investment, the incentives to earn and to invest our earnings increase.

A sorely need change regarding the dangerous trends we have been on since the early 80's:

 

http://mwhodges.home.att.net/family_a.htm#Saving

From the Grandfather Economic Report
by Michael Hodges

Rate of Personal Saving Plunges 100% - to new record low - $985 Billion missing

If families have less inflation-adjusted income, despite mother working, then family personal savings must suffer as a consequence - unless, of course, families reduce their consumption. But, families increased consumption spending and, to cover this, they reduced savings to historic lows and increased household debt to historic highs. Dangerous Trend !!!

The chart at the left shows a 45 year trend of that part of disposable income that has been saved - - called 'personal savings rate'.

Note: prior to 1970 the rate of personal savings was rising smartly - - as were family incomes per the first chart above - despite most families then having but one wage earner while also living without increasing debt ratios (chart below).

Then, family incomes stagnated - - and the saving ratio stopped rising as seen in the left chart - - then started falling rapidly - - plummeting since 1992. As of June 2005, savings were at an all-time record low of zero percent !! $985 Billion in savings missing in 2004 compared to savings ratio of 2 decades ago. (realized capital gains, not calculated in the savings rate, mitigate this chart somewhat if one wishes to call such savings - - but the trend with and without is at all-time record lows).