Flat Tax – Part II

Earlier this month, I wrote about how the flat tax has been gaining popularity in Russia and Eastern Europe.  It seems that businesses like the flat tax as well.

The Cato-at-Liberty blog notes (“…Losing Business to Flat Tax Neighbors…“) that many businesses are leaving ‘high tax-Hungary’ for its flat tax neighbors.  According to a Budapest Times  story,”flat tax is now the preferred system among the post-communist economies of Central and Eastern Europe. Is Hungary – already suffering the lowest rate of economic growth of the new EU member states – in danger of being left behind?…Thousands of Hungarian companies have already relocated their headquarters to Hungarian-speaking southern Slovakia – not only are taxes lower, but accounting has been made child’s play.”

Why do people like the flat tax so much?  The reason is that it is simple, fair, and decreases tax evasion.  The  flat tax is “…a simple, low-rate tax which is easy to collect and difficult to evade is likely to raise more money than a high-rate tax system that is full of loopholes and which nobody fully understands.”

Score one for economists Robert Hall and Alvin Rabushka who have consulted extensively in designing the flat tax systems in Eastern Europe.