Picture this: a 19% flat income and corporate tax. The tax reform results in an increase of tax revenue from 200 billion to 209 billion - 30% over government expectations.
No, I'm not writing about the US future. I'm actually writing about what happened in Slovakia in 2004. It's apparently a regional trend. Estonia, Latvia, Russia, and the Ukraine also adopted flat tax programs. Georgia, Romania, and Serbia are getting on the bandwagon. Slovakia increased their tax revenue from 200 billion in 2003 to 209 billion in 2004. That's 9 billion dollars in the first year in a country twice the size of New Hampshire.
These are countries that will be emerging from third world status because they have realized that they needed to make a change. They have found that by allowing their citizens to retain more of their paychecks, the citizens will spend more money. Spending money puts money into the economy. This is a good thing! Just in case I haven't made it clear, I prefer the Fair Tax over a Flat tax (go here to see a comparison).
Maybe President Bush should appoint Jose Pinera to the tax reform panel. Mr. Pinera, now with the Cato Institute, is the former Chilean minister of labor and social security who reformed the Chilean Social Security system. He helped Slovakia design their Social Security legislation. Already, more than one-third of Slovakians have switched to private accounts.
Slovakia joined other European countries such as Hungary, Poland, and Sweden in allowing their eligible workers to put half of their social security contributions into private accounts.
Now that Chile, Slovakia, Hungary, Poland, Estonia, Latvia, Russia, the Ukraine, Georgia, Romania, and Serbia have reformed their tax codes and/or Social Security systems, maybe it's time the US did the same.