Economics - Flat Tax in Europe

Opinion Journal, via RCP.

Interesting to note who and where flat tax regimes (something I strongly support) have taken root -- the former Communist-bloc nations of Eastern Europe. And their economies are humming, even formerly backward spots like Slovakia. It seems simple, but we here in the states just don't get it; if you want to create more of something (growth) you have to make the government take a smaller slice.

"Communism had been running what might be called a 40-year demonstration study in life at one end of the Laffer Curve—what happens to economies when you tax away pretty much everything. Freed of this utopia, the peoples of Eastern Europe now had to devise new tax regimes appropriate to nations eager—for want of a better phase—to work, save and invest.

The first former Iron Curtain country to cut its taxes was Estonia in 1994, led by Prime Minister Mart Laar, who claimed then the only economics book he’d ever read was Milton Friedman’s “Free to Choose.” Estonia established a flat rate on personal incomes of 26%; two years earlier it had abolished all import tariffs. Estonia grew.

After Estonia, flat-tax regimes coursed across Eastern Europe, as listed below (bear in mind that the top rate in the U.S. is 35%): Lithuania, 33%; Latvia, 25%; Slovakia, 19% (the former sad sack of the region, Slovakia’s growing economy has become its envy); Romania, 16%; Ukraine, 13%; Russia, 13%; and Georgia, 12%."

Pretty amazing, isn't it?