The Flat Tax: Working In The Real World By Prestopundit
SLOVAKIA goes to a flat tax and private retirement accounts. The efforts of George Bush and the Republican government look rather pathetic when set next to the freedom agenda of the Slovaks:
On Jan 1, 2004, Slovakia adopted a 19% flat income and corporate tax rate. The dividend tax and a plethora of tax exemptions were eliminated. The tax reform has resulted in an increase of tax revenues from SK 200 billion in 2003 to SK 209 billion in 2004 — some 30% above government expectations. This tax reform is part of a regional trend. Flat tax rates in Estonia, Latvia, Russia and Ukraine have also proved successful. More recently, the flat-tax club grew to include Georgia, Romania and Serbia. As Alvin Rabushka of the Hoover Institution argues, “President Bush’s most effective way to promote tax reform [in the United States] is to showcase the experiences of Eastern and Central Europe.”
Like Social Security in the U.S., the Slovak pay-as-you-go retirement scheme faced adverse demographic trends and, consequently, long-term financial shortfalls. The Cato Institute’s Jose Piñera, who as the former Chilean minister of labor and social security presided over the original social security privatization in Chile, helped Slovak reformers design legislation that allows Slovak workers to invest half of their social security contributions into private accounts. The legislation went into effect this year. Already more than one-third of eligible workers have switched to private accounts.
And economic liberalization is paying off big time for the Slovaks:
Between January 2000 and June 2004, cumulative foreign direct investment to Slovakia rose five-fold .. Steve Forbes .. wrote in Forbes Magazine: “The Slovak Republic is set to become the world’s next Hong Kong or Ireland, i.e., a small place that’s an economic powerhouse.” — Steve Forbes.
Content used with the permission of Prestopundit.