This GOP primary season has had its share of voodoo tax talk, dominated by the Fair Tax, abolishing the death tax, and making permanent the Bush tax cuts. Unless I’ve missed it, however, the flat (income) tax isn’t getting much traction. Thompson supports a flattish tax, and Giuliani’s favored scheme has earned Steve Forbes’ endorsement (Florida’s a lock, now), but it’s not central to their campaigns.
I’m agin a flat tax for all the usual reasons. Yet I’m a flat-taxpayer, and I can’t complain.
That’s because I pay income taxes in Georgia, which is the latest darling of American flat-tax evangelicals. As have many other post-communist countries (not least, Russia http://www.urban.org/publications/1000801.html ), Georgia introduced a flat tax (effectively 32%, now cut to 25% and on its way further down) and saw tax revenues go way up. What’s good for Georgia, Guernsey, and Transnistria must be even better for the USA, no?
I can’t speak for the other flat-taxing domains (some actual tax-policy researchers can), but Georgian tax collection previously was so ineffective that it hardly mattered what the rates were. The flat tax is indeed simpler to administer and reasonably hard to evade. While there’s no shortage of legal(ish) tax shelters in the US code, the IRS is pretty good at collecting what’s owed by ordinary wage earners. If the people at CATO are so impressed with Georgia’s economic-policy successes that they want to bring them to the US, I might suggest that they buy property in downtown Tbilisi and wait for it to be expropriated because “their papers aren’t in order.”