Progressive Nation

August 16th, 2005

Will Greece Adopt A Flat Income Tax?

Greece’s finance minister could announce a transition from a graduated to a flat income tax as early as next month. By doing so, it would follow Estonia, Latvia, Russia, Ukraine, as well as Hong Kong.

The problem with flat-tax thinking is the way it oversimplifies the role of taxes. The assumption is that the only consequences will be the decreased incentive for capital to move abroad or underground.

But what about the state? Doesn’t this impinge on the state’s ability to shape domestic outcomes that are favorable to it, instead of just corporations who now get to pick from a list of countries using lower taxes as a panacea for real factoral advantages?

But if flat taxes are empirically more efficient, why not? I certainly don’t have any philosophical objections to them. I don’t see any advantage to a large tax system as such - but the problem is that it isn’t that simple.

This entry was posted on Tuesday, August 16th, 2005 at 3:12 am and is filed under Economics. You can follow any responses to this entry through the RSS 2.0 feed.

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