Flat tax juggernaut??

[claude]

No stopping flat-tax juggernaut

NEIL REYNOLDS

From Wednesday's Globe and Mail


May 2, 2007 at 5:52 AM EDT

OTTAWA — In one of its first acts last year as an independent country, Macedonia (population: two million) legislated radical tax reforms. On Jan. 1, 2007, the country introduced a flat-rate tax of 12 per cent on both personal and corporate income, matching the rate introduced two years ago by Georgia (population: 5.6 million). On Jan. 1, 2008, Macedonia will cut its rate to 10 per cent - and achieve one of the lowest tax rates in the world.

Macedonia's tax revenues will almost certainly rise. The country's new, young (age: 36 years) free-market Prime Minister, Nikola Gruevski, cites the phenomenon of voluntary compliance that accompanies flat-tax regimes. "This reform will decrease tax evasion," he says, "and encourage people to meet their obligations to the state." As Russia (population: 144 million) vividly demonstrated when it adopted a flat tax (replacing a 40-per-cent rate on personal income with a 13-per-cent rate) in 2000, low rates are persuasive tax collectors. Russia's revenues rose 25 per cent in the first year, 25 per cent in the second year, 15 per cent in the third year. People who violently resist getting scalped will submit voluntarily for a trim.

With a 10-per-cent flat-tax rate, Macedonia will join two other improbable countries with "the lowest tax rates on Earth" - Kyrgyzstan (population: five million) and neighbouring Kazakhstan (population: 15 million). Uzbekistan (population: 26 million) has a 10-per-cent rate for corporate income but retains an 18-per-cent rate for personal income.

A number of other countries are credible contenders for the low-tax world title in coming rounds - Georgia and Russia, of course, at 12 and 13 per cent respectively, Ukraine (population: 47 million) at 13 per cent. Montenegro (population: 630,000), another country that gained independence last year, has enacted a flat-rate corporate tax of 9 per cent. Bulgaria (population: 7.5 million) is close behind with a flat-rate corporate tax of 10 per cent. Montenegro and Bulgaria, however, retain progressive rates for personal income. On the other hand, Mongolia (population: 2.7 million) adopted a 10-per-cent flat rate for personal income but kept its corporate rates progressive - though significantly reduced.

Around the world, tax rate competition is getting keener. Countries that resist flat-tax reform are nevertheless lowering rates. Poland (population: 37.5 million) has moved three-quarters of the way to a flat tax - with a single rate of 19 per cent for all corporate income, capital gains, dividends and self-employed individuals. Spain (population: 40 million) has introduced a flat rate of 18 per cent for all income derived from savings. Effective this year, Iceland (population: 300,000) taxes all personal income at a flat rate of 32 per cent - which appears high because it includes municipal as well as national taxes. It now taxes capital gains, dividends, interest income and rental income at a flat rate of 10 per cent.

Novel adaptations take place in unexpected places. The Indian Ocean island nation of Mauritius (population: 1.2 million) has legislated a flat tax of 15 per cent on all personal and corporate income - effective July 1, 2009. Guernsey, the Channel Islands ward of the British government, has enacted a zero-per-cent tax rate for all corporate income and has capped (at £250,000) the amount of personal taxes it will collect from any one person. The Isle of Man, another British ward, this one in the Irish Sea, has matched Guernsey's zero-per-cent corporate rate and imposed a lower personal cap (£100,000).

No country that has adopted a flat tax has ever switched back - among them, Ireland (population: four million), the highest-income, lowest-taxed country in Europe; the Baltic countries of Latvia, Estonia and Lithuania (combined population: seven million), the three newly independent countries that set off the flat-tax revolution in former Soviet bloc countries in 1994; and Hong Kong, the eccentric jurisdiction that gives all taxpayers the choice of paying either a progressive tax (from 2 to 20 per cent) or a flat tax (16 per cent). And the list of countries preparing for flat-tax reform keeps growing. Greece (population 10.6 million) and Croatia (population: 4.5 million) will be next. Kuwait (population 2.9 million) and Mexico (population: 107.5 million) are considering it.

People think North America is indifferent. Wrong. The revolution moves relentlessly closer. Five U.S. states now have flat taxes for personal income - Colorado, Illinois, Massachusetts, Michigan and Pennsylvania. Two more have copied Hong Kong's optional approach - Rhode Island and Utah. This common sense revolution can't be stopped.

nreynolds@xplornet.com

Top taxer

Denmark has the highest income tax rate in the world, with its top-taxed citizens paying 68 per cent of their hard-earned crowns. Denmark's lowest tax rate is 42 per cent. - Guinness Book of World Records

[Jazzzoline]

Having worked in that field for several years, I know EVERYBODY frauds and the more poeple you pay to find out that fraud, the more you get the money back. Result: when government tries and tends to slim down, that field gets bigger and bigger.

I'd vote for a flat tax. You wouldn't believe what's done and spent for the parties's friends.

[Brian Olewnick]

Originally Posted by claude

Five U.S. states now have flat taxes for personal income - Colorado, Illinois, Massachusetts, Michigan and Pennsylvania.

I didn't know this. What's the general consensus on how it's working?

[Gary Sisco]

At least two have no income tax: New Hampshire and Alabama. Nevada, too, in my day out there. I'm not sure about today. AL has a sales tax on every damn thing but the good part of that, at least pre-Katrina and likely again someday, is that anyone buying anything in the state, residents or not, was paying, so a lot of the sales tax collected was paid by Gulf Coast tourists. I know, I know, it's a regressive tax. So are all of them if you're on the bottom end of the economic food chain. Thing is, is this: No one *has to* buy things. That's a choice. An income tax is compulsory, *and* regressive in the US, whether you buy anything or not.

[walto]

In Mass., it works the same as all other income taxes. It's more regressive than increasing marginal rates here and there, so they fool with the exemptions pretty regularly. It's, you know, an income tax.

[Gary Sisco]

Here the state income tax is 25% of whatever you owe the feds. Thankfully, they haven't yet understood that both soc sec and medicare taxes are income taxes, too, and regressive as hell. They just don't call them one.

[Dan G]

Here in Alberta we have a flat tax of 10% on personal income, not sure what corporate tax is. With a fairly high base exemption of about $15k + other basic exemptions, people under $20k annual income probably pay nothing. Except provincial health insurance, which is about as regressive of a tax as you can get because most good jobs include that in the benefits, so only the working poor really pay it. They would still have to pay federal income tax too.

We also have no provincial sales tax, just a federal one.

The result...obsolete hospitals, shortage of nurses, overcrowded universities, overworked and underpaid public service, crumbling roads...and a lot of really rich people wanting to privatize healthcare because they would rather pay some corporation than have the gov't take the money and provide services that the poor can use too.

[Gary Sisco]

Well, we have several of those results without a flat tax, so, there you go.

[rollhead]

Another example of how the well-to-do want to screw the working class.

[Gary Sisco]

How else would they become well to do?

In the US, however, if you're working class, the income tax (which whatever they call it does in fact include soc sec and medicare seizures, er, withdrawals from wages) couldn't be much more regressive than it is. A flat tax in many cases would be financial relief, if that part of the deal is remembered. They are income taxes because the money seized from paychecks is in fact considered by the guvmint general revenue. It's supposed to be specifically targetted revenue but it isn't, and hasn't been for very many years, if indeed it ever was. So if you figure those two into the working class's percentage of seized wages, it's many factors higher than the officially declared income tax line. Many factors.

[Noj]

Juggernaut, bitch!

[GoodSpeak]

Paul Tsongas promoted something like this didn't he?