Flat Taxes

Bjorn Tarras - Walhberg, Secretary General of the World Taxpayers Associations, spend most of his time traveling around the world and preaching the doctrine of "Flat Taxes". He meets with Finance Ministers, Presidents and Prime Ministers and tries to convince them to lower their income taxes and replace it with a flat rate.

According to Walhberg, a flat system is:
  1. Simple - Easy to understand. Everybody can easily find out exactly how much they need to pay. At the moment, most people do not really know how much their obligations are due the complicated system in place in most countries.
  2. Ethical - Does not discriminate. Both the progressive and regressive systems are open to ethical debates. A lot of people argue that one or both systems favor or discriminate the rich or poor and vice versa.
  3. Fair - Everybody pays the same rate. There is no disincentive to produce/work less.
  4. Promotes competition and economic growth - A reduction in taxes through the imposition of a flat rate levels the playing field. Big, small, old-timers and start-ups are both subjected the same rules.

According to Walhberg, his home country (Sweden) experienced diminished growth that started in the 70's, when the government started increasing taxes. As soon as the reverse was implemented, growth started to become positive. He cites as an example, 13 states that include Russia. Under President Putin, Russia lowered its taxes and introduced a flat rate (13%). After that, growth was immediately felt. Russia immediately grew by 47% and experienced an average annual growth of 15%, thereafter.

Vamos a ver. At this point, I agree that most of us don't really know how much we owe the government. A friend in the US, spent eight hours last Saturday, just trying to figure out how much they really need to pay the IRS. Come every tax paying season, we all go through the process of sitting in a quiet place and furiously try to compute how much we really have to pay.

I believe in some taxes. Taxes that are enough to pay the cops and soldiers (who will protect my neighborhood) and build the roads that will be used by everybody in traveling from one place to another. Beyond that, there are only a few other taxes that I believe in.

As a favorite quote goes:

"That government governs best which governs least."

1 comment:

Anonymous said...

They're talking about this topic at Johnchow.